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Biotech / Medical : ARIAD Pharmaceuticals

ARIA 23.99

0.0%

Feb 17 4:00 PM EST

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To: BRAVEHEART who wrote (455)	2/6/1999 3:35:00 PM
From: Dr. John M. de Castro	Read Replies (1) of 4474

Beware of the Ides Of February I was just looking through the Edgar filing on ARIA's bottomless convertible and discovered that February 15 is the Conversion Date for the convertible. If converted after this date the "investors" (I use this term only to be technically accurate!) get the shares at 90% of the average or the four lowest bid prices on the 22 trading days preceding the Conversion Date. If I interpret the document correctly (heaven knows, I'm over my head in this mass of legaleeze) then this week should be a very bad one for ARIA. The incentives for the "investors" is to sell short and drive the bid price down this week. They then can get a boatload of shares for their series "C" preferred shares. If they are successful and drive the average bid down to 1.5 over this week, they will get 750 shares of common for each $1000 series "C" preferred share. Since ARIA floated 5000 of these puppies, this could yield 3,750,000 shares. These will then be available for sale on the open market. This is the point where I'm only guessing and I'd hope that someone more knowledgeble about these things would let us know the rest of the scenario. But, my guess is that the "investors" will be selling the shares slowly over the next six months. Every time the price begins to rise it will get stopped by sale of the huge overhang. One place I get confused is with the pre conversion short-selling. How much of the 3.75 million shares have been sold short and the conversion allows the "investors" to cover their shorts. What I am struggling with is what will happen after Feb. 15. Since, the short selling will stop and the incentive to drive the price down will be over, I'd expect an increase in the value of ARIA shares. But, the overhang and the sale of these shares should restrain any major upward momentum. ARIA may be held down for quite a while as the "investors" unload their cheap shares. Thought? John de C

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