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Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: David Sirk who wrote (615)	7/10/1999 2:38:00 PM
From: RockyBalboa	Read Replies (1) \| Respond to of 1438

David Sirk. Although I'm not a thread regular I allow myself to answer. First, in fact guessing the future moves of a stock is fishing muddy waters in part, especially when not all clauses are disclosed. There have been cases, although few, in which convertible clauses have been watered down, or a convertible has been rebought because the company has got other sources of cash income... But if you followed through the thread then you will see that te odds are on average, way smaller for companies doing dilutive financing than not. I remember only 2 which endured the selling and the stock trades higher than before, only 2. Some others have risen because they rebought the convertible early enough. But there have been hundreds which went off, far off, very often by levels of 90 to 99% of the original stock price. Some ended up with stock outstanding in 100s of millions, like BICO which has I think 600M out, or SYQT which had 120M out but the financing rounds did not prevent it from filing bankruptcy. That said, and because of the average stock price direction after doing junk equity financing, or "toxic" financing, one can say with good reason, the chances are simply too little. Regarding the clauses: The very basic information about the convertivle style, premium, fixed or variable & discounted, with "sweeteners", does tell a lot about the final design of the debenture. By-clauses can sometimes mitigate the effects but never zero them totally. When a deal has been closed, a company can usually not walk away without a severe penalty. If, say the convertible holders are prevented from converting before 1 year, and, moreover, they are not hindered in doing hedging transactions meanwhile (they would never accept such a deal!), it does not change the outcome. They will engage in hedging transactions for the reason to reduce the "Credit Risk", as many institutions have set up credit risk limits. And as companies dedicated to earn healthy profits and not being charities, they are devoted to maximise profits applying the given means. As you pointed out: "You say your purpose is to save hard working individuals thier investment. I can appreciate that., I would say, yes, as I have been burned once, namely by owning a stock which has done a floorless convertible, and I know the reason why, because the convertible holders cashed out what they forwarded - which is legitimate - it is a big red flag to all investors in common shares. If you want to read about what does happen (not "might" happen") so please read: #reply-10454560 All backed up by facts, no speculation, and the same simple conversion rules. From a different registration statement: "Sales in the public market of substantial amounts of common stock, including sales of common stock issuable upon conversion of the Series B Stock or the exercise of the outstanding warrants, could depress prevailing market prices for the common stock. Even the perception that such sales could occur may adversely impact market prices." ... even the "perception" .... Regards is.com