Roger's 1998 Short Picks Message Board

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Strategies & Market Trends : Roger's 1998 Short Picks

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To: Roger A. Babb who wrote (832)	1/18/1998 1:52:00 PM
From: Mark H. Bornfeld	Read Replies (2) of 18691

Pardon my ignorance, but I'm a little green about convertible securities. By all the excitement about ESMC, this "floorless convertible" thing is an accurate indicator of a drop in stock price. By "floorless", do you mean the conversion price is not set, so the conversion ratio (if the stock price at conversion time is very low) is unlimited, leading to a substantial dilution of the stock float? And if that's the case, why would those holding the convertible preferred rush to convert them if holding them while the stock price bottoms out would result in them converting to a larger number of shares? (sorry if I'm just not getting it.)

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