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Technology Stocks : CDRD (CD Radio)
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To: Dale Baker who wrote (283)11/6/1997 9:34:00 AM
From: Candle stick  Read Replies (2) of 904
 
>>>>>I agree that something is up with the convertible holders since they
haven't been shorting heavily

I think that this is a wrong statement. First of all the stock has a short position of over 1.5 million shares. How do you know that some or most of this is not from the convertable shareholdes? Secondly, convertable preferred shareholders may be locked out from shorting. It could be part of the agreement, we dont know.

But most importantly, shorting is NOT in the best interest of the convertable preffered shareholders. Why, you ask? You see, the return that these shareholders get is GUARANTEED. The way it works is that they sell their shares on the open market and are issued those shares by the company at a % dicount to the SELLING price. This discount equals approximately a 26 1/2% return on their money(if memory serves me). So why bother to sell short and incur carrying costs? Whats the point. If the stock is 25 dollars and they sold at 20, they get screwed. They can't legally sell for the maximum discount until the 14 th on November. Besides if the stock is 1 dollar or 100 dollars they still earn the same 26 1/2% on their money. Share price is irrelevant. So you see there is no real reason for the preferred shareholders to sell or even care what the current shareprice is, because their profit is locked in and Guaranteed. Its all spelled out in the 10 Q filed in May.....best of luck to you..............selling will start on NOV. 14th in my opinion, since there is nothing further to gain by the preferred shareholder after that date. They will want their money back to do another deal somewhere else.......;^)
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