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Gold/Mining/Energy : Solv Ex (SOLVD)
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To: JJB who wrote (5726)7/2/1998 6:54:00 PM
From: Gary L Schultz  Read Replies (3) of 6735
 
JJB,

I'll discuss it with you. Each outstanding share of SOLV will be converted to whatever the final agreement says. In the case of legitimate shorts (if there are any left) their stock will be converted as well with no net effect to their bottom line. If there are any naked shorts (as has been widely publicized) then those 'shares' will be deliverable (when they are ultimately covered) with the new shares.

I have never been able to see the point taken by many on this thread that naked short covering would somehow boost the stock price. Any stock transaction is basically done between two people. If I say to you I would like to sell 1000 Solv at a given price and you agree, you fork over x amount of dollars. I still owe you 1000 shares of stock.
When I decide to cover my position, I need not buy the stock (since you never owned it anyway) all I have to do is pay you y dollars and the contract is satisfied. I guess I could buy 1000 SOLV on the market and give them to you, but you might agree to take an equal cash settlement. This has NO effect on the stock, since we never transacted the deal in the market to begin with. This type of transaction is done every day in the commodity markets. Take soybeans for example. At any given time, there are more contracts for beans than there are beans to satisfy the contracts. I need not own (nor does my broker) any beans at all in order to sell them. The agreement is pure risk.

This type of transaction is perfectly legal (IMO) since if fulfills all the requirements of a contract (two agreeing parties, an object and consideration).

In the case of legal shorts: If I were short 1000 shares at 20 bucks and the new stock was issued at 10. I could enter the market and buy 1000 shares of the new stock for 10 and satisfy my contract - as well as double my money.

Don't get your hopes up too high.

Gary
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