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Technology Stocks : p-com (pcms)
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To: Rob Preuss who wrote (1083)5/19/1999 5:39:00 PM
From: Bernard Levy  Read Replies (1) of 1461
 
Rob:

At this stage proposing a precise scenario as to
what will happen to PCMS is extremely difficult. One
key event is the shareholders approval in June which
would allow PCMS to issue more than 20% in stock
to the floorless convert holders. The 20% limit
is imposed by the Nasdaq. If shareholders refuse to
approve this waiver, then the floorless holders can
force PCMS to trade in the pink sheets, where no
such limit exists. So what will the floorless holders do?
Wait until the shareholder approval is secured in June and
then short the hell out of the stock with a bottom below
$1. Or short now, and drag PCMS in the OTC market if
sareholders are recalcitrant. The second approach
might result in a long litigation, so I would expect
that the damage to PCMS will occur after the shareholder
approval to waive the 20% limit.

Note that in spite of the floorless issue, shorting PCMS
might be equally dangerous, since P-Com could easily be
put up for sale. The company has the option of paying back
the $15M it borrowed plus all sorts of interest and fees.
It is easy to imagine a situation where a buyer
could come in and buy out the convert holders.

Figuring out how this one will play out is extremely
difficult. However, when the floorless convert, I
would say PCMS will be a buy at that time (it might
be at an insanely low price).

Best regards,

Bernard Levy
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