Next week and why..... livermoreJesse
(44/M) May 3 1998
1:02PM EDT
My ASSUMPTIONS are that the fundamentals are sound. The products are winning awards, the company has new management, a new division is gearing up in network sales, Quarterdeck Japan opened last month, technical factors that have been addressed led to last quarter's revenue shortfall. The main assumption is that the products will sell soon.
Given the assumptions, then the stock price has a floor which is in place because friends and family of insiders know the fundamentals are sound. Technically the floor is 1 1/4 to 1 3/8. Someone is buying here.
There is selling pressure as preferred holders want a low price to convert preferred to common. 60% of this selling pressure has been removed. We have 40% remaining converting at 12% per month. The selling pressure although less is still a cap on rallies.
In this mix of floor and ceiling we have the day traders who control the action. In a low priced issue with a big float and volatility they can buy a huge position without chasing it up. They can spike a rally on rumors, news, etc. Once they do they buy into it and the stock spikes more then they sell out.
What does it take to break the cycle? Mainly, removal of the preferred sellers and good fundamental news. We will always have volatility with this stock. Day tradeers love it.
When will it happen? Nobody knows. But the suspicion of long term players like myself is that the dilution is unwinding exactly as predicted by the company. I assume again they can control the floor. The dilution will close out within 90 days, my guess. Fundamental good news will leak out this quarter. The preferred will finish the conversion at higher prices over the next 90 days. The dilution will be slightly less than 67,600,000 and with good fundamentals and no selling pressure the stock will go up in spikes with HIGHER LOWS.
Disclaimer: Here comes the hard core speculation (the prior was the soft porn).
If you press me to time it (which is hazardous as I really can't do it with more than an educated guess) I would say THIS QUARTER is going to be an upside surprise. One month is in the books. If the Preferred crowd knows this then they will want to convert 12% more May 1, 1998 and the last batch June 1,1998 before earnings in July. So there will be selling pressure into July. How much? Less than in March and April. If the insiders know this quarter is better than last confirmation will come with higher lows, ie. 1 9/16 this week 1 11/16 after another 2 weeks. Make no mistake the traders will cause short smart spikes. You can play them to get out if you want. I am buying the dips.
If I am a dupe of the insiders unloading the stock I apologize for my blind faith. I have been in this game a long time and mostly as a short and put player. My gut says that this game is unwinding and it will look scary on the downside before the real up move.
A prior fright: I was in was with SoftImage a few years back. In one day it traded sharply down and dropped from 21 to 16. A few days later Microsoft announced a Take Over at $22 (if memory serves). Why the down spike? Flush out the outsiders and insiders scoop it up before the good news is out. Call me cynical but I have seen too much of this in the past 20 years.
Final Disclaimer: This is a game for those with strong stomachs. Know what you can risk. If I am a dupe, I risk losing everything.
High risk and high reward.
Jesse
qway@juno.com
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