Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : TSIG.com TIGI (formerly TSIG) -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (31515)	6/20/1999 10:52:00 AM
From: Zeev Hed	Read Replies (1) \| Respond to of 44908

ED, in the first few lines of my last post I wrote $.04, it should have been $.40, too late for edit thus this minipost. Thank you anonymous poster for finding the error and notifying me via PM. Zeev

To: Zeev Hed who wrote (31515)	6/20/1999 1:04:00 PM
From: ED S.	Read Replies (1) \| Respond to of 44908

Zeev, You also assume that most PP investors converted and sold and shorted other people's stock from a higher price. It work if this was done by all from the start, THIS HAS NOT BEEN THE CASE AS ALL SHARES WERE NOT CONVERTED AT THE HIGHER LEVELS AND SOLD AND "SHORTED". You have NO absolute proof that this was done, you ASSUME that this was done, and you ASSUME this was the PP intention from the start, you present ONLY the worst-case possibility. What if you are wrong, or half right? All stock transactions are a matter of public record. BEST, Ed

To: Zeev Hed who wrote (31515)	6/20/1999 7:04:00 PM
From: cicak	Read Replies (1) \| Respond to of 44908

Hi Zeev - here is some commentary from a legal discussion forum that indicates you may NOT cover a short with shares that were not freely tradable when the short was created. Anyways - you know a heck of a lot more about this issue than most of us - but it does appear that there is some contrary opinion out there to the scenario you presented. It may be (I'm not sure) that the Joseph G. Martinez taking part in the legal discussion is the Vice President/Counsel of JAMAR Technologies, Inc. (NAZDAQ: JMAR). biz.yahoo.com washlaw.edu ===================================================================== Re: Short Selling To: Multiple recipients of list <securitieslaw-l@aall.wuacc.edu> Subject: Re: Short Selling From: eokamoto <eokamoto@ix.netcom.com> Date: Mon, 22 Feb 1999 20:27:46 -0600 Reply-To: securitieslaw-l@aall.wuacc.edu Sender: securitieslaw-l@aall.wuacc.edu Joseph Martinez wrote: > > Thanks for the response. The shares purchased in the private placement > have in fact been "registered" in a Form S-3 Registration Statement. > The reason I put quotes around "registered" is because it technically is > not the shares which are registered, but the resale publicly of those > shares which is registered. In other words, the owner has been listed > as a selling shareholder and must deliver a resale Prospectus to the > purchaser(s) of the shares. Until the shares are sold, however, the > legend stays on the shares because it is always possible that the > Registration Statement could later lapse or otherwise no longer be > effective when the shares are later about to be sold publicly. The > company does not want to (and I believe it is the practice not to) > remove the legend unless and until the shares are actually sold with a > Prospectus or until Rule 144 has run. The transfer agent has a list of > the selling shareholders and a copy of the Prospectus and is able to > confirm that a covered transfer will be processed. Thus, it is my > understanding that even though the shares are treated as freely tradable > because they can be re-sold publicly in a selling shareholder > registration (so long as the Registration Statement is effective), they > cannot be used to cover the short for two reasons. The first, more > fundamental, legal reason is that the SEC has taken the position that > shares which were owned but which were not freely tradable when the > short was created cannot later be used to cover the short postion, even > though they have subsequently been included in a resale registration > statement or, if not, have run the Rule 144 holding period. > Conceptually, the SEC takes the position that the shares which were > later delivered to cover the short had to have been in existence and > freely tradable when the short was created because that is the time they > were "sold" publicly. The second procedural, practical reason may be > that the share certificates still have a restrictive legend on them and > I would think that that would make a difference in whether a broker > could "cross" them or in whether the owner can be treated as both long > and short for this purpose. I do not know the answer to this question > and am trying to understand whether there are other ways that the person > can so the equivalent of crossing the shares. Also, more fundamentally, > the company wants to remove the short and possibly find out who the > short is if that helps in doing so. > > > -----Original Message----- > > From: Nelson E. Timken, Esq. [SMTP:netimken@erols.com] > > Sent: Friday, February 19, 1999 5:31 PM > > To: Multiple recipients of list > > Subject: Re: Short Selling > > > > The only thing I can think of to discourage this might be for the > > company to > > start a buyback program to reduce the float and up the price, thereby > > forcing the shorting party to cover. > > > > I do have one question- how could the shorting party be expected to > > cover > > with the shares acquired in the placement until they were registered > > and > > thereby negotiable? > > > > Nelson Timken > > JN Capital, Inc. > > jncapital.com > > > > > > > > ----- Original Message ----- > > From: Joseph Martinez <jgmartinez@jmar.com> > > To: Multiple recipients of list <securitieslaw-l@aall.wuacc.edu> > > Sent: Friday, February 19, 1999 8:02 PM > > Subject: Short Selling > > > > > > >A company noticed a substantial short position arise in its stock > > almost > > >1-1/2 years ago. The short represents about 4-5% of its float and > > about > > >10 times its daily trading. This occurred immediately following > > having > > >done a private placement involving a little more than the number of > > >shares in the short. The company agreed to and ultimately did > > include > > >the private placement shares in an S-3 Registration Statement. The > > >company strongly suspects, but cannot prove, that the buyer in the > > >private placement did the short. The company's stock was at an all > > time > > >high at the time of the private placement (and short) and has since > > >dropped about 50%. The company would, of course, like to get rid of > > the > > >short. I understand, however, that it is a registration violation to > > >deliver shares to cover the short which at the time of the short were > > >not freely tradable, even though subsequently they were included in a > > >registration statement. My questions are the following: > > > > > > 1. Is there a way to legally cover a short by effectively > > >using the subsequently "registered" shares? Someone mentioned to me > > >that although the holder could not directly deliver the registered > > >shares to cover the short, they might be able to "cross" them in the > > >market with the short. Does anyone know if this works and exactly > > how > > >it is done? I suppose it is possible that they could sell their > > >registered shares and then immediately buy back the same number of > > >shares to deliver to cover their short, but given the large block of > > >stock, I would think that the sale would depress the price, but that > > the > > >subsequent buying would increase the price so that it would not be a > > >true "wash". The other bizarre thing is that the short has been > > >outstanding for 1-1/2 years. The person must be getting eaten up by > > the > > >interest charged for the short, yet they still haven't covered. Has > > >anyone seen this situation and/or seen how a company resolved it? > > > > > > 2. Although we cannot prove who the short is and they deny > > >it, I understand from NASDAQ that we cannot find out the identity of > > the > > >short seller without a court order. Does anyone know how else to > > find > > >out the identity? What about suing a John Doe alleging trading > > >violations to obtain an order for NASDAQ records. Would this would > > and > > >are there risks? Can we allege trading violations merely based on > > what > > >I have outlined above (which appear to be more suspicions)? > > > > > > Any input would be appreciated. ===================================================================== Regards, Phil

To: Zeev Hed who wrote (31515)	6/20/1999 10:55:00 PM
From: Suzanne Newsome	Read Replies (2) \| Respond to of 44908

Zeev, what an ugly, ugly picture! I tried to climb out onto the window sill to jump, but it's only 6 feet down, and the ground is very soft due to rain. I reviewed your post in detail and except for some very minor mathematical differences, found your scenario to be theoretically possible. Surely you will not mind if I throw out some other things to think about. Your scenario is based on $2,000,000 of debentures that are shorted with impunity with razor-like precision. It is my understanding that less than $3.0 million of the PP has been drawn down. Bernie Deutsch tells us his family and friends have invested $1,300,000, and he also said that they would not short. That leaves us with approximately $1,600,000 of debentures to account for. One of the PP holders is a member of the Board of Directors. When he accepted a position on the board, did he not incur a fiduciary responsibility to the shareholders? This is not a rhetorical question. Can LeShufy (sp.?) short TSIG into oblivion? Does he not have to act in the best interests of the shareholders? If he does have a fiduciary responsibility to the shareholders, would he have accepted a board position and thus limit his ability to manipulate his debenture if he thought the other PP holders were going to short TSIG into oblivion? How much money did LeShufy lend TSIG? Is it fair to guess $200,000? That leaves us with $1,400,000 to account for. At some point in the past the total number of shares escrowed for the PP was 17 million. Then at some point the escrowed number was 15 million. That drop of 2,000,000 shares was explained as a PP holder who converted. I cannot put my finger on exactly when that conversion took place except to say that it almost definitely occurred before Board Debacle Friday. If we assume that 2,000,000 shares were converted at $.23, that accounts for $460,000. Was this conversion Bernie Deutsch? He told us he converted 2 million shares at .245. Is this estimated $460,000 included in the $1.3 million total above attributed to BD et al? IOW, am I counting this twice? Maybe Bernie could clarify this for us. Assuming the $460,000 is not included in the $1.3 million, we have $1,400,000 less $460,000 or $940,000 in debentures that may be shorted with impunity. Paul Henry has stated to me that some of the PP holders will not convert while the price is in it's current range. Is he referring to LeShufy and Deutsch et al or are there other PP holders who will not convert and presumably will not short? I have no way of knowing. Your scenario, Zeev, depends on at least $2 million of the PP holders acting in concert. The evidence is pretty strong that that is not happening. Bernie referred to one person who had been selling since $.40 "who was causing all the problems." Were there others? Did this one person (out of 8 PP holders) have $900,000 to $1,000,000 in debentures or did he hold a smaller amount? Bernie Deutsch referred to a plan on which he was working on behalf of friends to go into the market and buy 1 million shares. That would have put a damper on price deterioration. There are rumors (the term "rumor" implies unconfirmed information) of big deals that are on the verge of being announced. With the price at 6 cents, the panic selling by shareholders is over, and accumulation beginning, would somebody be able to short enough shares to drive the price down enough with the risk that these announcements are going to be announced any day? Maybe they could. Or maybe the PP holders are going to cover at $.12 or $.13. I believe shorting is taking place but involves an amount of debt far, far less than the $2,000,000 in Zeev's scenario. What Zeev posted does not prove that fatal shorting is going on. Nor does what I posted above disprove his scenario. It is clear to me that heavy buying by current and new shareholders would break the shorting cycle. However, if this buying were not adequate to overcome any shorting that may remain out there, buyers could get hurt. Parenthetically, it's pretty obvious why the company is looking elsewhere for the last bit of financing. Regards, Suzanne