To: David Sirk who wrote (578 ) 7/9/1999 9:51:00 AM From: Zeev Hed Read Replies (1) | Respond to
David, I do not have the chart of CLVE, but typically, the ceiling is the price where the stock was trading during the negotiations of the deal. Assuming that was the case, GEM could have used the time window between signing the document and delivering the funds to short in the open market (and thus the recent weakness, of course). Let say the debenture is just for $1 MM (we do not know how much since CLVE did not think we stupid investors should know, right?). So let assume GEM shorted a million shares and got paid $1 MM, this money is now delivered to the company in the form of the debenture, and GEM has no money at risk. The stock goes to $100, you say, they deliver the converted shares. But let say the stock is now at $.5, well guess what, GEM can now short another million shares for a total short position of 2 MM shares, and they pocket $500,000 (already a 50% gain), well, now the stock just dropped to $.33 (we are getting there), and GEM short position can ge increased further, to 3 MM shares and they pocket another $330,000. When the stock goes to $.10, their short position can increase to 10 MM shares, ands since these BB do not even report short positions, you'll never know. Mind you, every time the stock is halved, they make another $500,000 on each million bucks they have not even invested. So, why be satisfied with 120%?
