Zitel-ZITL What's Happening Message Board

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Technology Stocks : Zitel-ZITL What's Happening

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To: patchman who wrote (16780)	7/25/1998 4:33:00 PM
From: Steven M. Kaplan	Read Replies (1) of 18263

Convertibles are FLOORLESS NO MORE: Patchman stated>>If you are long Zitel, you may want to check out the S-3 dated 15 July 98. It outlines the proposed sale of 3.2 million shares to offshore interests who will try to drive the price down as far as they can before converting their new shares. This is called a floorless discount convertible and is the worst case scenario for the average stockholder who doesnt understand what management is about to do to their investment. << A number of the "shorts" have tried to scare off the "longs" by claiming that the convertible bond holders would be trying to force down the price of Zitel's stock in order to obtain a bargain price based on the reset provisions of the bond. They claimed that this reset provision makes the conversion price "floorless". Well, the reset provision calls for the conversion price to be lowered only if the average closing price for Zitel's stock for the 10 day period immediately preceeding July 31, 1998 is less than 90% of the preset conversion price of $3.92. That would mean that the average price would need to be lower than $3.53 in order to reset the conversion. If you multiply $3.53 times 10 trading days, the maximum cummulative sum of the closing prices can not exceed $35.30. As of Friday's close, the cummulative sum of the closing price for the first 6 days of the 10 day period is $41.125. So, in order to reset the price, the closing price of Zitel for the next 4 days would have to average -1.4563. Since a stock (to the best of my knowledge) can not trade below zero, there is no way that this can happen. The convertible bonds are now convertible at the original price of $3.92 only. They are floorless no more. Fri 7/17 ......$ 6.9375 Mon 7/20 ...$ 6.6875 Tues 7/21...$ 7.2500 Wed 7/22..$ 6.9375 Thur 7/23...$ 6.8125 Fri 7/24.......$ 6.5000 .............. $ 41.1250 Cumm Total for first 6 days of period ............... $ 6.8542 Average Price ............... $ 35.3000 Cumm Total needed for 10 day trading period ............................... prior to 7/31 ................ (1.4563) Average price needed for remainder of 4 trading ................................ days Steven M. Kaplan

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