Well lws, eventually it had to happen. Last week a received an irate phone call from a "Jim Crombie" (I trust he gave me his correct name but I cannot vouch for it) supposedly with Integral Capital. He claimed that Integral Capital owned part of the $15 MM floorless that HEC recently bought at a premium of 40% when HEC refuse to convert at prices under $2/share. He also claims that I and few other are doing them great damage by calling them "Floorless Bandits" and suggested that we, that little band of people trying to expose death spiral causing securities like these floorless are under investigation by the Nasdaq (he would not reveal the name of a person in the Nasdaq conducting such an investigation). Crombie was complaining that some of his limited partners were calling in and stating that they do not appreciate being called "Floorless Bandits", or some times for short "Bandits".
First, Integral Capital was not mentioned in HEC's S3 filing (but then they could be part or associated with RGC). Second, we have to ask ourselves if the term "Floorless Bandits" is defamatory. When I coined this term, I took it as an analogue to the term "SOES Bandits" which was quite acceptable on the street (as evidenced by its use in WSJ and Barron's and few other financial publications).
The dictionary definition of "Bandit" is robber, and we have to ask ourselves if the results of the floorless securities is indeed robbery. In financial history, we have attached the name "robber" to other market participants which used the securities markets to enrich themselves, typically on the back of unsuspecting public holders of the securities. There is rarely an implication that such robbery was illegal (take for instance the term "Robber Barrons" which was in wide use earlier in this century). I believe therefore that the term "Floorless Bandits" is fully warranted and a factual description of the institutions and people engaging in robbing unsuspecting holders in companies with "less then stellar" financial balance sheet, since I can cite at least 20 companies in the last 2 years in which the action of the floorless directly or indirectly robbed the public holders of a major part of their wealth. There is no implication that the bandits actions are illegal in any way, on the contrary, the actions are well recognized hedging activities, but the results are the same, the public holders which are unaware of the existence of these floorless financial instruments, or chose to ignore them, or are not sophisticated enough to fully comprehend the impact of the presence of such instruments on their holdings, is robbed (legally) of their hard earned capital.
If the "investigator" from Nasdaq is real and not a figment of Crombie's imagination read these threads, he is welcome to reach me (he surely knows my phone number, or he can call Crombie for it) and we can discuss what other more fitting terms should be attached to these operators.
Zeev
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