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Technology Stocks : VALENCE TECHNOLOGY (VLNC)
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To: kolo55 who wrote (9608)3/20/1999 5:02:00 PM
From: Larry Brubaker  Read Replies (3) of 27311
 
Lets recap some more.

This actually started when we were discussing the possibility that Castle Creek could have hedged its investment in the preferred shares by shorting the stock.

You said this was not possible because they would have had to file a beneficial ownership statement indicating the change in beneficial ownership. I pointed out that since they did not file a beneficial ownership statement indicating they owned the (preferred) shares in the first place, there certainly could be no requirement that they file a change in beneficial ownership statment.

Then today we were trying to get to the bottom of the current count of shares outstanding, by suggesting some of the increase may be due to Castle Creek converting some of its preferred shares to common. You said this couldn't have happened because the quarterly statements still say they own 7,500 shares from each tranche. You went on to say that the preferred shares (and the common they are convertible to) are already included in the count of shares outstanding. I pointed out that this is impossible because the count of shares outstanding has not increased sufficiently to account for all of these shares.

Zeev speculates that there has been some conversion of preferred shares because the balance sheets reflect far less than the $7.5 million value of each tranche, even after accounting for the $750,000 fee paid to Gemini. If so, this would mean the 7,500 counts of preferred shares in the quarterly financial statements are wrong.

But if these counts are not wrong, then what is the explanation for why the balance sheets value the two tranches at far less than the face value of the preferred shares less the fees paid? One explanation is that some preferred shares were converted. You got any others?
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