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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis
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To: Gotham Guru who wrote (1643)8/13/1998 5:39:00 AM
From: Q.   of 2506
 
Instigator, your question about TNCX brings up the interesting issue of how the fund would behave if there is a floor, the stock is falling, and the co. fails to register the shares.

Yes, the May 1 TNCX S-3 indicates there is a $3 floor on the conversion price. The deal closed in March when the stock was above $5, and the S-3 was filed when the stock was at $4 3/4. The stock is now at $3, which is the floor.

I wonder what the selling shareholder, KA Investments LDC, has done. The S-3 was never completed (the original had some missing sections like plan of distribution, and the co. never filed an S-3/a to amend it. So most likely the registration is not effective.

If I were in the shoes of KA, I think I would have shorted the stock as it was falling toward $3, as I would otherwise face an almost certain loss.

Maybe this is what happened. The short interest soared in June and July, reaching 356 k shares, which is enough to cover half the $2.2 private placement.
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