Chip, that link did not work for me. But if this is the post you mean, I do think this is interesting, and what elk posted makes a lot of sense to me:
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By: Elk
Reply To #373 by Rocky Wednesday, 7 Oct 1998, 1:03 AM EDT
Post # of 383
Rocky the most important factor in the many moves DGIV has made this past year is the finance deal they cut with Wescott last Fall, same holds true for FTEL though via a different way. Wescott's deal set the stage for what happened. A relentless short driven by Wescott, was recognized and joined by some outside MM's, and they drove it down to pennies. Wescott shorted against the shares received from the deal, so they did not have to cover. I am making an educated guess that there was also a large naked short that covered, and the covering drove the stock from .20 to 5.25. The was the day it gapped opened from 3.00 to 3.50, a new all time high. It then ran that Thrusday morning to 5.25 before it broke, and plummeted to 3.75. The shorts had covered. What held it at 3.75, I beleive was a combination of SI buying power, fueled by the amazing run and the company buyback putting a floor, but thats pure conjecture. When news hit it and hit it hard, it was pumped by SI, but they were not the only force driving it. The traders and the shorts were all over that thread, and they wanted it to run up. Why? Because it gave them plenty of room to short it every month, and drop it a dollar and a half to cover, at will. Now the other element is that from what I read there were warrants attached to Wescotts deal, and these were then shorted against by Wescott in the spring and early summer. They were running up and down, and making money playing it both ways. They also moved a heck of a lot of shares at some premium prices. The volume of buying over 5 bucks in this stock is enormous.
That was unprecedented.
Thats not by accident.
I find it amazing that the SI thread wants to blame the company, blame the hypers, yada yada... That thread was played like a fiddle. No question about it. Yes the company has it short comings, and that SI thread was out of control, but this game was not in eithers hands.
Take a look at this chart, for the company CITI:
chart.yahoo.com
Ugly, huh? Well that is what happens when a company cuts a Convertible debt deal with no floor. Its a brutal finance deal, and buries companies. Thats just one type, DGIV did a different type but it always comes back in one form or another. Unfortunately when you get small, emerging companies, they need money. Well it costs in a lot of ways to get the necessary capital, no one gives it away.
elk
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As far as elk's comments of SI members being "played like a fiddle," speaking for myself I will say that I do feel that way, and take responsibility for my own over-excitement in those days when the stock was running. Heck, who could not get excited about a stock running the way Digitcom was? What we blinded ourselves with was the plethora of press releases that coincided with the stock running, the way the internet sector was so hot, and that IP telephony was one of the hottest within that sector. But the real blame belongs to the financing deal and the subsequent shorting that occured.
BTW, the CITI stock that elk mentions is the one little engine was/is pumping.
elk, I am not a member of raging bull, so if you read this, this is very insightful on this whole thing. You may be right or may not, but it rings true given everything that has gone on. At this point, there is only one thing that can save Digitcom, and that is a solid contract.
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