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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: I. N. Vester who wrote (9247)3/13/1999 3:56:00 PM
From: Larry Brubaker  Read Replies (1) of 27311
 
IN Vestor, you are wrong.

First of all, a floorless variable rate financing is the option of last resort for companies with few other choices for raising money. No company would risk unlimited dilution of their stock if they had other means of raising money.

Second, both Zeev and I have acknowledged that this floorless is a "kindler and gentler" version of a straight floorless. It is kinder and gentler in that the floorless provisions do not kick in for 6 months. This "grace" period gives VLNC the opportunity to perform before the potential for massive dilution can be realized.

Third, this is a wonderful deal for Castle Creek because it allows them to make money no matter what happens. If the price goes up, they can make money. If the price goes down, they can make money.

All Zeev is suggesting is that they are hedging their bets by shorting (and taking their money off the table) when it becomes profitable for them to do so. It becomes profitable for them to do so when the price rises far enough above the fixed conversion price of $6.

<<The fact is that CC has an unhedged long position of 1M+ shares.>>

You don't know that this statement is a fact. All you know is they still have 1.3 million shares from the first tranche. You don't know whether they have hedged against that position or not. I suspect they have.
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