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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: FMK who wrote (5063)11/15/1998 9:55:00 AM
From: Greg McDaniel  Read Replies (1) of 27311
 
I believe it is important to know the percentages that fail with the floorless convertibles. What credentials does your contact have other than he works in a large brokerage house. How much research did this person do to come up with less than 5% of all floorless convertibles fail? My gut says it is greater than 5% but would prefer to have well documented facts. I am 100%confident I will pay my mortgage every month in 1999. I do not feel so certain about this deal until a po or letter of intent is hand though. So where are we with this company:

Cons:
Questionable deal with a hedge fund which can hedge its bets but can not manipulate the stock price.
No purchase order or letter of intent and milestone date of 1/27 to have this in hand.


Pros:
Positive insider buying
Analyst visit to NI on 12/3
One production line creating samples with all phases of the line at "some" speed.
Other lines in progress or on order.
Volume in stock has picked up and priced attacked the 52 week high.
A high profile director named.

Rumors:
Big deal to be announced week of 11/16.

Let's look at low, middle and high road scenario over the next few weeks together with others on this board and I will need some help.

Low road scenario:
No announcement made week of 11/16.
Stock retraces its two week rise to 5ish area
No announcement made week after Thanksgiving or during December.
Stock sinks to 4ish area in early December.
No announcement made in January.
Early in January stock sinks to 3ish area.
Later after 1/27 the floorless convertible kicks in and dilution begins.

Middle road scenario:
No announcement made week of 11/16.
CFO is announced though week of 11/16.
This keeps the stock price close to its current level (8ish) in November.
PO or intent letter delivered in December.
Stock has anticipated this and is at 10 by end of December.
Stock price floats around 10 until next quarterly conference.
Stock climbs after positive conference call to 15.

High road scenario:
Announcement made week of 11/16 of PO or letter of intent and
the battery is displayed with the potential OEM at Comdex.
Price accelerates to 10-12 area week of 10/16.
CFO is announced but the big news is already released and so stock priced is not moved by this significantly.
Quarterly CC in February, Valence begins to show a turn around in balance sheet and material contract has firmly been established. and the price of the stock moves to 18 - 24 range.
Financing is secured by other means than a floorless convertible.
Valence starts making money 3rd or 4th quarter of 1999. High growth stock investors begin to see the quarterly earnings accelerate and join the party. Stock climbs to 40ish area by end of 1999.


Who can add to these scenarios and assign probabilities to the scenario occurring? Would knowing the failure rate of floorless convertibles help us assign a probability to the low road scenario?
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