Rod, it is a very simple calculation, RGC's interest is to keep the shares as low as possible during the next month, since then they can buy shares (for $30 MM since they have the right to buy the same number of shares from the company at the exercise price of the debenture). Their debenture is convertible anyhow by April 1999, so why should they convert to fewer shares? I would submit that they have already shorted a good number of these shares around $3, they could be doing a little covering before shorting much bigger time during the critical period, then lay back, see what the bounce is (and I fully expect the stock to go under $2 before January $9), maybe even cover some themselves and then short back on the late January bounce to ($3?). If it goes higher, fine, they can deliver the converts against that position, if it goes lower, they cover again and on the next bounce short. They cannot lose, since the December pricing period is what their final conversion is at, at worse, if the stock is driven further down, like to $1, they can end up with 30 MM shares (many of these, of course, already delivered against prior shorting exercises if the stock went the other direction. RGC is in the business of printing money, not extracting oil.
Zeev |
