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Technology Stocks : Cymer (CYMI)
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To: Emile Vidrine who wrote (8360)11/5/1997 6:05:00 PM
From: Jess Beltz  Read Replies (2) of 25960
 
I too have problems with the bonds-for-shorts theory. The conversion feature does give the holders the right to convert at the specified conversion price (say 47), but on a post split basis, that's a very high price (albeit "guaranteed") for anyone to be covering at. Much of the deterioration in the share price has occured since the bond issue, meaning that the shares had to be shorted at prices considerably below the conversion price. Covering such positions using the bonds would be very expensive and incur large losses. More fundamentally, the conversion feature is a Call Option, giving the holder the right to exercise at the conversion price, which he/she would do if the share price were above 47. The call increases in value as the share price moves above the conversion price. I think the fact that the total (and not even the incremental) short interest approaches the number of convertible shares is coincidence. You can use it to build a conspiracy theory if you want, and you may be right, but i don't really think so.

jess
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