David,
I agree that CC has a lot to do with PARS low price. I know exactly what these kind of preferred deals do to stock prices, and I'm sure that the 1500 preferred shares still outstanding keep a lot of buyers away, thus holding the stock lower.
What I meant in my previous post, was that CC isn't doing most the selling. Others are selling, and there are no buyers (mostly because the CC deal, and because nobody expects major news anytime soon).
I still think that CC has a large short position, which will be covered when the preferred is converted. These kind of guys like to play the arbitrage games, they short the stock with no risk (as they own the preferred) and the minute they convert they have a nice gain.
That's what hedge funds do, they look for these kind of special situations. These guys will make their 20% - 50% with minimal risk, and without losing any buying power from their portfolio.
You can play the same game with convertible bonds. For example, ESCMF has a convertible bond, which now yields a staggering 20% (as the company has entered bad times). One can buy this bond (get the 20%) and short the stock. If the company goes bankrupt you win (bond is worthless, but short covers the loss... besides bond holders will probably get something even in case of bankruptcy, unlike shareholders), and if stock recovers you get the 20% and convert the bond to cover the short.
Hedge funds love these kind of situations.
In conclusion. Yes, the CC deal has messed up the stock price and is keeping buyers away. But, I don't think CC is doing most of the selling at this time. Than again, who cares how they are doing the damage, keeping buyers away and selling stock has the same results.
Let's hope they convert soon, as without the preferred outstanding PARS looks much more attractive.
Omer |
