Craig,
<<I think we should believe the Tail Wind guy, and concentrate on the other Reg D players. If Citadel was a 41% holder, they would have more firepower than Tail Wind anyway>>
Just to clarify, there are several funds that together are referred to as the Citadel Entities. Together the Citadel Entities bought 77% of the Series C offering (850 shares). One of the funds bought 425 shares, the other funds in the CE bought the other 425 shares.
I don't know why we have been picking on Tail Wind; they are not the largest preferred shareholders, and they say they have not been shorting. Maybe we just don't like sailors.
Also, I think I'm missing the logic of why the preferred shareholders would convert their safe preferred shares into volatile common shares, park the common stock for a while, and then dump the common shares to depress the future conversion price. Perhaps somebody can run the numbers and show me why this would make economic sense. It looks to me like taking money off the table by selling immediately works to their advantage, but I'm willing to be convinced otherwise.
I'd also like to offer a topic that we can worry about for the next couple weeks, or until Ancor makes a new announcement. For the past few weeks, the Series C conversion price has been $1.16, and before that it was at $1.03 for a long time. As of 11/6/98 the price begins to ramp up until it hits $1.75 on 11/18/98. The only way for the conversion price to fall is for the stock price to fall. Does anyone have the motivation to work to depress the stock price?
A higher conversion price is not in and of itself bad for the preferred shareholder. If they are holding common stock for the long term, why would they want to depress the price? If they want to capture quick profits, they can do that at any conversion price. If they convert at $2 and the price pops to $4 on big news, they benefit as much as if it pops from $1 to $2. I'm willing to agree that it might be easier to get a $1 pop than a $2 pop, but I can imagine big news making $2 or better increase in a short period of time.
The benefit to us of a higher price (aside from our account statements) is less dilution. The price has not been below 1 1/4 since 10/9/98, and has not been below 1 5/8 since 10/19/98. If we are fortunate enough not to revisit those numbers, the common share equivalent to the remaining 700 preferred shares plummets.
On 11/5/98 each preferred share will convert into 8461 common shares. The maximum possible dilution is therefore another 5.92M shares. On 11/17/98 (with no attack on the stock) each preferred share will convert into 6317 common shares. This would reduce the dilution to 4.42M shares. If the trend in improving prices we have seen since 10/9/98 continues, the total dilution will be even less.
Let's expect dirty tricks on or shortly after election day. If they don't appear then, they could show up anytime after that, of course, but I might begin to think that the Big Boys are not intent on destroying our favorite stock.
Greg |
