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Technology Stocks : The New QLogic (ANCR)
QLGC 16.070.0%Aug 24 5:00 PM EST
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To: Pigboy who wrote (18315)9/30/1998 2:54:00 PM
From: Greg Hull  Read Replies (1) of 29386
 
Pigboy,

<<I think now I'd rather have these preferred guys be less rich than me rich. I pray for it now like a giant ninny every morning when I log on.>>

I think the situation that is best for the preferred shareholders is a quick pop in price. If you want those guys less rich, pray for a flat to very slowly rising price. They have to convert eventually - only 30 more months max I believe. If you can tough it out till 3/2001 and figure out a way to keep the price flat and Ancor still in business, you can be a Pyrrhic victor.

The other extreme is to hope for a sawtooth market that gets them out very quickly. You maximize dilution but get them headed for the next desperate CFO sooner.

I harbor no animus toward the preferred shareholders. They have their job to do, and seem to be doing it well. They set up very attractive terms in the Series C agreement, and are now reaping the benefit of their forethought.

As recently as June I did not understand the trap door that accompanied the convertible offerings. I think I've learned a lot in 3 months, unfortunately many investors knew of these liabilities years ago. Message 5101981

I think I'll take James B. Cloonan's advice in the future:

"For most individual investors, if you believe in the technology of such companies and have them in your portfolio, keep up-to-date on the company's financing plans. If they are going to, or just have, financed with variable convertibles, sell and wait to pick up the stock again when the price falls."

Greg
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