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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: Rich Wolf who wrote (9210)3/13/1999 11:27:00 AM
From: Larry Brubaker  Read Replies (1) of 27311
 
Rich, I think you are probably wrong. I would guess Castle Creek could short the common in the market independently of their holding of the preferred shares. They would want to hold onto the preferred shares while they short to act as an insurance policy in case the price takes off. If the price does take off, they convert the preferred shares to common and cover their short position using the common stock they acquired at $6 through the conversion of the preferred shares. If the price decreases to earn them a profit from the price they paid for their short position, they would convert in the open market and wait for the price to go up to start over again.

Because the price has not taken off, they haven't had to deliver their common stock to cover their shorts. Therefore, they are still listed as a beneficial owner.

If I were a VLNC long, I would be more comfortable thinking the 1.2 million share short position was Castle Creek hedging their investment rather than thinking somebody else acquired such a large short position. In many cases, a large short position in a story stock is bad news because the entities who take such positions usually have thoroughly researched the issue quite thoroughly.
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