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

To: CMon who wrote (885)	8/24/1999 5:06:00 PM
From: Gerald Walls	Read Replies (1) \| Respond to of 1438

the company can choose to redeem for cash (shares they would have issued * price ) if they can't stomach the dilution. This presumes they can get the cash. If not, then there is no floor after the feb 18 date and the shares convert according to the "lesser of" provisions. I agree that most likely the company won't have the money to pay for the stock, but even if they did ... How's this for a convoluted scenario: Wait until a couple of weeks before the end of the floor period, short then hell out of it to drive it way below $7.35 for five days, then cover, cover, cover. The price goes above $7.35 (meaning the call provision is moot) and then convert at the lowest five days of the past 22 to cover the rest of the short position and end up owning a significant block of stock to boot. If the stock is under $7.35 on conversion day and the price is significantly about the lowest five-day average, then the number of shares would be very large and the price relatively high and the company wouldn't be able to afford to avoid the dilution.

To: CMon who wrote (885)	8/24/1999 5:19:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 1438

CMon, that is what I would have presumed, but that is a strange language, the language should have been "redeem for cash the debenture at its face value" (maybe even plus a given premium). The document does not define "closing sales price on the date of conversion", is that the "conversion price? (the lowest 5 closing bids in the last 22 trading days), or the actual closing on the date conversion is sought? In any event, this type of clause is definitely stating as I said, that until the 17th of Feb. 2000, there is a ceiling and a floor and after that, the company probably hope to be in the clear. I know not if they will be. Beyond that date, the debenture is definitely floorless. Zeev