Shorting stocks: Broken stocks - Analysis Message Board

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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis

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To: RockyBalboa who wrote (2302)	5/5/1999 12:05:00 AM
From: Q.	Read Replies (2) of 2506

anybody else here short SACM? The stock is down to 1.3 now, and the co. is in a world of pain. They had a delisting hearing at NASD on April 15. They haven't heard yet what will happen. I'd guess we'll know by the end of the month. They don't meet the net tangible asset requirement for listing. They have toxic debentures that haven't flipped yet. Apparently the registration isn't effective yet, as they just filed another S-3/a. The co. says they want to swap them for preferred stock to help meet the listing requirement. Trouble is they don't have any authorized shares of preferred to issue, so they are calling a special shareholders meeting to request permission. The convertibles have a 22% discount. With the market cap now down to $10 M, they represent something like 30% dilution. That's big enough almost to assure a toxic death spiral when they start flipping. Besides, the co. needs more cash now, so they have to sell more equity. So if they do stay listed, they'll get killed anyway. This thing is in the eleventh hour of being a broken stock.

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