Cymer (CYMI) Message Board

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Technology Stocks : Cymer (CYMI)

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To: Asymmetric who wrote (10628)	11/28/1997 1:02:00 AM
From: ben luong	Read Replies (1) of 25960

I think many investors are buying cymer shares on margin, which gives brokers the right to lend cymer shares out to shorters (at least for the portion of the shares you bought using borrowed money). This can explain what happens a few weeks ago when the stock tanks to below 19 and the share price was still dropping - people who brought on margin got margin calls so they had to sell cymer shares to meet their margin requirement. The shares shorted can still be traded like regular shares - they are just phantom shares created without stock certificates. I am not sure how NASDAQ reports their share volume. I think that even shares change hand between market makers can also count as trading volume, which creates an illusion that cymer stocks are very liquid despite cymer's float of only 6+ millions. For a growing company like cymer, shorters know that cymer won't buy back their shares in the open market because they need lot of cash to fund their working capital and equipment. This will create less chance that shorters will be called to buy back their shorted shares. Convertible bonds are a big no-no to cymer shareholders. But I think cymer issues convertible bonds (to fund their expansion) so they can pay less interest than if they issue regular bonds, which will probably have a B to BBB rating and hence higher interest rate. This is bad for investors in a short term. But in a long term, this tells me that management is confident that the stock price will eventually go up to trigger the conversion. Another possibility is that arbitrators establish a long position using option (by buying calls and selling puts at the same striking price) and short the equivalent number of shares of stock. Since the time premium of the put options are higher than that of the call options (this is particularly true a few weeks ago), the arbs actually establish the long position with a lower purchase price (strike price - (put price - call price)) than the price they short the stock. They pocket the difference as profit. Sooner or later at one of these option expiration dates, they arbs will close out their positions by buying back the shorted shares. Let's see if this actually occurs. the stock

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