EA's float is 5.9 M, shares out are 9.3 M.
While you seem to be concerned that the float is too small for liquidity, taxikid, I find that a small float is desirable when new shares are about to hit the open market due to discounted convertibles flipping into common. Remember, these new shares are not going to be bought and held by the convertible owners. They are going to be sold promptly on the open market. And that will put pressure on the stock price.
For a short-seller, this is the beauty of discounted convertibles: institutional selling on the open market that is predictable in its amount and timing.
What will really kill the stock price is a high ratio of new shares to float. When the denominator is small, the ratio is big, and I am happy. That's the situation with EA. The two discounted convert deals with the newly registered shares amount to 2.7 M new shares total, which is nearly half the existing float. That's a lot more than the 10% that is typical of most discoutned convert deals.
This is not to say that there is no such thing as too small a float. If the float were smaller than 2M, it would be too hard to borrow shares, and I would avoid shorting. However, 5.9 M is just fine.
With a volume of 70 k, the liquidity is already good enough for me.
BTW, I notice that in the last few days the stock has been declining on sharply increased volume. Yesterday was down on 5 times normal volume, on no news. That's exactly what a short hopes to see a few weeks after an S-3 or S-3/a filing for a discounted convert.
:-)
Oh, one more thing about EA:
There is a THIRD discounted convert deal waiting in the wings, for a half-million shares. This is one that was issued a long time ago to GFL Advantage Fund (a well-known offshore buyer of discounted converts) which flipped most of its convertibles, and then sold the remaining ones to the co.'s own chairman of the board. A couple of days ago, EA filed a preliminary proxy for a special shareholders meeting to give the okay for the now-former chairman to flip those converitibles and some warrants too. Here's an excerpt:
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS To Be Held March 31, 1998
--------------------------------------------------------------------------------
Please take notice that a Special Meeting of Shareholders of EA
Industries, Inc., a New Jersey corporation (the "Company"), will be held at the
offices of the Company at 185 Monmouth Parkway, West Long Branch, NJ on Tuesday,
March 31, 1998, at 2:00 p.m. for the following purposes:
1. To consider and act upon a proposal to approve
amendments to certain Subordinated Convertible Notes of the
Company originally issued to GFL Performance Fund Limited and
GFL Advantage Fund Limited and now held by the former Chairman
of the Board of Directors of the Company, certain trusts for
the benefit of members of his family and an unaffiliated
investor and the issuance of warrants to purchase shares of
Common Stock of the Company in connection with such amendments
2. To consider and act upon a proposal to approve
amendments to certain 10% Series A Subordinated Convertible
Notes of the Company originally issued to the former Chairman
of the Board of Directors of the Company, certain trusts for
the benefit of members of his family and an unaffiliated
investor and the issuance of warrants to purchase shares of
Common Stock of the Company in connection with such
amendments. |
