Packaging Plus<PKGP.OB> blames fall on short-sales
PLAINVIEW, N.Y., Jan 23 (Reuters) - Packaging Plus Services Inc said Friday that it believes the recent fall in its share price was the result of substantial selling by debt holders, who have requested conversion of their debt into common stock.
The company said that, to date, it had received requests for conversion of more than $16 million free trading common shares.
Packaging Plus said it has been advised by legal counsel that many of the allegedly "offshore" debenture holders have breached the terms of the debenture agreements and accordingly, has terminated the conversion rights under the agreements.
The company said it intends to vigorously enforce its rights under the financing and debenture agreements and is currently contemplating, if necessary, obtaining new financing to redeem the debentures.
If issued, a large majority of such share conversions would have represented control block positions, subject to U.S. Securities and Exchange Commission resale restrictions, and would not constitute free trading shares, it said.
The debenture agreements allow for the conversion of the debentures into common shares of Packaging Plus, on the defined terms, or alternately, it is at the company's discretion to fully redeem the debt in cash with an interest premium.
Packaging said it now has 9.9 million shares issued and outstanding, of which 3.7 million are restricted shares.
The company made the comments in a statement it issued after receiving numerous inquiries from shareholders regarding the recent volatility in its share price.
Packaging Plus stock was up $0.09 to $0.25 at midday Friday. The stock's 52-week low was around $0.04, its high $2.875.
At the Close on Friday, 1/23/98:
PKGP - PACKAGING PLUS SVCS INC
Exchange: OTC Issue
Last Price: 0.29 at 16:01
Change: Up 0.13 (+81.25%)
High: 0.33 at 14:12
Low: 0.18 at 9:32
Open: 0.19
Previous Close: 0.16 on 1/22
Volume: 2,773,400 (Nearly HALF the outstanding, unrestricted shares)
If the request for conversion of 16,000,000 shares indicates the short interest, then each unrestricted share has almost three holders. ie. has been borrowed and shorted twice. This is not a fundamental play, but has the earmarks of a tremendous short squeeze to $1.50 to $2.00 as the float contracts with panicked short covering.
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