Shorting stocks: High fliers Message Board

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Strategies & Market Trends : Shorting stocks: High fliers

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To: chester lee who wrote (467)	3/25/1998 3:32:00 AM
From: Dante Sinferno	Read Replies (2) of 709

<<mechanics of a warrant redemption>> I'm a little confused since according to your S-3 club charter you guys look for theses opportunities on a regular basis. I posted this one here since it was an SB-2 filing instead of an S-3 and figured it might have slipped through the cracks. Anyway , here's my take on some of the mechanics... First and foremost , is the dilution. According to this filing there will be 5.589M shares before and 6.314M shares after for a difference of 725,000 new shares. A small amount of those would be considered to be in firm hands such as the shares underlying the options. From memory I think there were 75K ? or so , so let's say 650K or so left that will trade freely. Contrast that to the public float and we are in the 30% dilution neighborhood. Second , the market for the warrants diminishes as the expiration date becomes fixed. Who will pay you $11 for your $10 warrant that will be redeemed in a week or two ? Thirdly , warrants are typically purchased by those who have no intention of redeeming for stock and thus panic selling sets in once that decision is forced. These warrants weren't set to expire until Sept or Oct as I recall. They are being redeemed under the typical warrant provision that says if they trade over a certain price for so many days , etc. etc. Fourthly , many believe the price is runup just before these announcements as a means of getting a short off at a higher level. (This is what is occuring now IMO as the stock is rising on no news with bad news , just around the corner) The only thing missing here that would make this an even better play is the absence of FAHN as a market maker , although I'm crossing my fingers that they will show up on the next monthly market maker listing. :-) Here's hoping John chimes in with any comments...I'm not an expert and there are no guarantees here. In fact , since too many shorts can be a bad thing , I'm gonna shut up on this one pretty soon.<g> Rob

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