Thanks for your response. I appreciate the opportunity to discuss this on technical and non-technical terms. A few responses:
1. I don't deny that, under the convoluted scenario you describe, ATG could be redeeming (or converting) at prices lower than the price the stock is trading for on the conversion date. It is certainly possible under the terms of the PP agreement - but the notion that the stock price can be manipulated and timed to that extent by Rose Glen, at that time, in the face of actual developments in the value of the company occuring then (and between now and then) is, as you say, convoluted at best. I rank it low on my probability meter. And the notion that Rose Glen will engage in such manipulations to the potential detriment (indeed, possible ruination) of its own investment, and at the risk of getting caught, sued and its reputation destroyed, is in my view more than convoluted - ridiculous is the adjective I would use.
2. I do not think shorting per se affects the price of a stock, because borrowing shares on margin does not increase "supply" - what causes the price of a stock to go down is poor financial performance, bad news, failure to meet deadlines, and other matters that give rise to selling pressure. What causes the price of a stock to go up is good financial performance, good news, implementing business plans, meeting financial targets and consequent buying pressure. I can see how massive covering of a short position can cause a stock price to go up faster than it should, because covering creates buying pressure, but I fail to see how borrowing a stock on margin increases supply and causes selling pressure. Please explain what I am missing. Which is why, by the way, that I think shorting works only when the company you are shorting is doing poorly, or has unnaturally spiked in price (as when ATG spiked to 18 on unfounded rumors of a merger between the NYSE and the PHLX), and why shorters are so inclined to spam internet message boards with negative disinformation - to create fear and thus selling pressure. It was the unwinding of the NYSE/PHLX merger rumor, the perception of delay in a launch originally thought to take place in July, and not the fact that short positions were created in May and June, that led ASTN's stock to drop back to the low teens and below. But even if a company is being shorted like crazy, if it nevertheless attracts buyers because it is doing well implementing its business plan, and achieving its financial goals, well, a tripling of the short position while all that is happening will not help to create selling pressure. What am I missing?
3. That anybody would base a decision on whether to invest in a company on the "hostility" meter of an internet thread is pretty scary. Yes, the ATG supporters and detractors are both very . . . animated . . . a good percentage of the time -- the "war" of words is, IMO, a function of the degree to which the shorts have relied on distortion and disinformation to attack the company, but the more "rabid" longs are the reverse mirror image and pretty tiresome too. To believe many shorts, VTS should never have launched on Friday, since it doesn't exist and has no customers, and to believe many longs, launch should have spiked the price leading up to that day by 100% or more. Both were obviously wrong. But the fact that those who choose to post on Yahoo or SI are not "cool" and "detached" should come as no surprise. I have seen relatively few posts made by "cool" and "detached" people on any message board, including those of companies that are kicking butt.
I am very very long on ASTN - and up about 150% at this point (but not selling). In my view, the stock will probably rise fairly steadily over the next 6 months from where it is now to about 15-20. But I concede that it may drift around as it has in the past month or two, between 9 and 12. And Rose Glen may take advantage of that drift to squeeze a few extra shares out of their conversion rights. But not below $7.85 per share. And one cannot discount the importance of the $20 MM raised from Rose Glen in terms of making ATG a more valuable company -- rolling out eOX and eMC in early 2000 rather than in late 2000 is huge to ATG the company (even more so to ASTN, the stock). Developments in the implementation of ATG's business plan will influence the price movement, far more than any investor strategies between now and then, and of course, any unexpected "bad" news or developments may influence it in a negative direction. But that is what investing is all about.
This "floorless" debate as it relates to ATG seems to me like an attempt to "tag" the company with an intrinsic negative when in fact, what gave rise to it (the Rose Glen PP investment) is so positive to the Company that it is almost beyond debate. Maybe you will see this as a sign that I am too emotionally committed to my investment, but I must tell you that I absolutely reject the notion that ATG is a fraud, and that the PP is a device to enrich its insiders in the short term at the expense of its stockholders in the long term. Exactly the opposite is true. Yet, that is the gist of the shorts' position here. I concede that ATG may not succeed over the next 3-5 years to be the company its stockholders hope it will be, but it will not be because of 144's, the Rose Glen PP, or anything else the "shorts" have put out there so far.
MST |
