>>If they need to cover this position we should see the rate decrease
again this month. <<
I agree with you here George. The rate of shorts going up should decrease because they are limited to the 5% maximum and if they haven't covered it would make sense that that rate would decrease.
I do disagree about the covering though. Take Greg's example for instance and let's pretend this is the total conversion.
>>Example: On 9/25/98 a Series C preferred share was worth 10,160 shares of common stock. The closing price on that day was $2 1/8, which was not the high for the day. The market was offering the preferred shareholder $21,591 for their $10,000 preferred share. The easiest way to make the transaction is to sell short 10,160 shares. The preferred shareholder bought this preferred share in 2/98 and now "sold" this share in 9/98 for an annualized return of 223%, with absolutely no market risk.<<<
Now the Series C holders are short 10,160 ANCR shares(they pocketed $21,581) and long 10,160 ANCR converted shares. The position is now boxed.
Say the borrowed shares weren't even yours and for some reason you shorted 10,160 of someone elses ANCR shares. Now the shareholder you borrowed stock from wants their 10,160 shares back(he wants the actual certificates) and you have to cover. Just DELIVER him your 10,160 converted Ancor shares. You don't have to buy them back to replace your short because you already own enough stock to cover the shares you need to replace. So covering doesn't really hurt or help Ancor because no new buying is involved in covering.
You get the same result from never covering if you short your own shares because your not going to demand that you cover your own short with your own converted shares. You've seen all the money you are going to see from the transaction when you sell the short.
Net result is Series C holders made $21,581 on a $10,000 investment. Ancor repaid their debt in stock. 10.160 new shares added to the float and the entire transaction is done. NO?
I just don't see how covering would help the share price of Ancor because it doesn't involve any buying of Ancor shares on the open market. No?
George, Greg- Tell me I'm wrong and I'll give up on this point. I think Greg's scenario makes sense and is certainly very plausible. On the other hand it is not the only way possible.
For instance I would question whether the series B and C holders have the same objectives or that they even know each other. For instance the Saudi Prince went his own way right out of the box.
Have we numbed a few of you out there with beating this horse?
Ed
|
