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Non-Tech : Cityscape Financial (CTYS)
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To: Shane Stump who wrote (1099)10/19/1997 3:22:00 PM
From: Rational   of 2544
 
Shane,

" ... but please keep in mind that the same conjecture could have have (and was applied) around August 14th when the price dropped to around $10 from $14."

This is again hind-sight. This past history of price movements adds very little value to my judgement now about the true value of the stock.

Linking the current price drop to the existence of "floorless" convertible preferred stock does not make sense to me because these preferred stocks were issued in the middle of Sept and (if the logic expounded on this thread is sensible), the price should have sropped to $6 on Sept 15 -- instead, the price rose to $12 from 10.

I believe that the current price drop is linked to new (bad) information that was leaked in advance to the sellers/ short-sellers. I have noticed many small caps face this problem of price reaction before a public announcement. The convertible preferred stockholders will find it costly to short-sell if good news is in the offing because they will fall in their graveyard.

Suppose that CTYS announces the good information (assuming it has some) now and the price moves up sufficiently before the due date of conversion, then the convertible holders will be trapped. If CTYS had good information, they would immediately announce it to precisely trap these short-sellers -- I am assuming that they are smart(?). If they are smart, they cannot have the good information to announce (IMHO).

If CTYS management is not smart, has good news, and is not announcing, then it is possible that the convertible holders genuinely wanted to convert before the price ran up. In this case, the price reaction could be due to insider selling on margin call. I do not believe in this scenario of good news not being announced when the stock is taking a beating.


Sankar
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