lws, it will take too much space to provide a full explanation, I would suggest going to:
Message 5368910
where I have explained how floorless bandits profit from the death spiral. They rarely take control of the company. They need not invest more then the initial convertible issue. Often, they recapture back their whole investment almost upfront and move to the next one with that money. Once they decide they had enough, or meet some very strong buying on the way down, they may either cover, but in most case, they convert and deliver the new shares against their short position. Quite a racket.
Mind you, in a successful attack from the floorless, they can quadruple their money (and no longer have their own money at risk, apart of the time during which they set up their initial short) or more, so they often do not care that a company could be successful and give them in three years a double or more.
As to the question of resources required, I think I answered it, they must be able to lay out the initial sum of the floorless, no more. Sometimes they do not even have to have that money committed at all, particularly when there is a delay time between "signing on" and delivering the cash.
Zeev |
