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Strategies & Market Trends : Roger's 1998 Short Picks
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To: T. Mann who wrote (7272)4/18/1998 4:35:00 AM
From: Dale Baker   of 18691
 
If I read this right, it's not a floorless convertible. It's a "ceiling" convertible where the preferred holders never have to pay more than $36 for their shares and $39 for their warrants. Thus it's in their interest to drive the stock as far over $40 as possible, then short it against their convertible shares which they only pay $36 for and the $39 warrants (note that below $36 they can only convert at market price).

ORG at $44 gives them a quick 20% profit. Total dilution would be more than 700,000 shares out of 23 million outstanding, which won't affect the supposed EPS much. Not that anyone cares about EPS with biotech stocks.

Could be why the touts are spamming SI with the "short squeeze" story. It wouldn't be hard to induce a panic with 9 million shares short and the split approaching.

ORG could even be a good long play up to $45 or so. Then look for a clear momentum shift and short it back down to the 30's.

I'm thinking about it.
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