Floorless Preferred Stock/Debenture Message Board

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Strategies & Market Trends : Floorless Preferred Stock/Debenture

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To: Ignite44 who wrote (85)	10/1/1998 12:10:00 PM
From: Mama Bear	Read Replies (1) of 1438

thomas, I was speaking in general. I couldn't find anything filed with the SEC concerning IDBEF, so there is no way I could comment specifically. The holder of the convertible uses the warrants to hedge a short position. The short is usually initiated at current prices, and as the price falls more shorts are put on. The convert holder uses the convert as collateral against the short sales. Usually there is a 'look back' provision in the language. The longer the better for the convert holder. If the price spikes up they can convert at (usually) 85 or 90% of the lowest closing price in the last 5, 10, 20 days. So, they short the hell out of the stock at 3, and drive it down to 1/2. The further it falls, the more shares they can short. With the look back provision, there is no risk because of the price spiking up. If the price spikes, they can force conversion, and then sell the warrants for more profit. "You also have to look at the track record of the investor which has historically supported companies of this nature. " I won't dismiss this as a possibility, but I have never been aware of an organization that does this type of financing that had one bit of interest one way or the other concerning the company. How did you become aware of this 'investor' who has such a history? Red flag is tossed if the company assured you it is so. Barb

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