Sankar, it is my guess that shorts have covered most of what they wanted and may short any additional rally to 5. Remember, those that are short as a hedge (holders of the floorless) need not worry nor need they cover, they simply deliver their converted shares. If the short interest includes a lot of the floorless short, then we might not even get demand of shares from these quaarters as well.
The situation at CTYS is not getting better, it getting worse. The lower the share the more dilution will be incurred, If we assumed that the book value at 30 MM shares was $6 shares (not taking the loss they will probably announce early in November which will further reduce the book value), noe the book value is only #4 shares, becuase the equivalent conversion at $3/share will result in 30 additional million shares. While I would not exclude the possibility of a DCB to the high 4', you must be an extremely nimble trader to catch it, and I have no idea if it will happen at all. The risk of having another buck shaved from the stock tomorrow is much greater. Mind you, if the stock sinks to 2 tomorrow, guess what happens to the book value? It goes to about 2.25/share!!!! The power of floorless dilution at work.
Zeev |
