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Non-Tech : Cityscape Financial (CTYS)
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To: Wayne Umfleet who wrote (1147)10/20/1997 10:14:00 PM
From: Rational   of 2544
 
Wayne,

I want to add to the points you are making.

* Comparing EXSO (which has been a losing consultancy firm) with CTYS that has a $3+ billion loan servicing portfolio and positive earnings is ridiculous.

* Simply because a failed EXSO had also issued convertible preferred stock (with a conversion price equal to the n-day trailing mean price) does not tell anything about what would happen to other firms that issue similar convertible preferred stock.

* Branding these convertibles "floorless" (meaning zero conversion price) does not make any sense to me because the conversion price is n-day trailing price which can be zero only if CTYS is worthless!!

* Look at SyQuest that also issued many tranches of such preferred stock when it was trading as low as $1.5. The stock price has tripled since then. When managements are confident about their future, they tend to peg the conversion price to n-day mean trailing price.

* CTYS long-term price will depend on fundamentals, not what the shorters would like to have as the price.

* It is possible that CTYS is expecting bad earnings. It is also possible that it is negotiating a sell-out and so it was obligated to register the new shares to issue to convertible holders. This issuance would be mandatory if any deal is in the offing because a sell-out deal is a major event and in this event, CTYS has to (before it is known) have the shares registered. They may not have to allow for a conversion since the $50 mil (series B) is callable by CTYS before they can be converted. Half of the other tranche is converted and the remaining can be converted any time now.

* I am not suggesting to anyone to buy or to sell or to short-sell. Please do your individual analysis to make your own decision.

Sankar
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