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

To: Zeev Hed who wrote (913)	8/29/1999 10:33:00 PM
From: mst2000	Read Replies (1) \| Respond to of 1438

Zeev - Thanks for the explanation - with Larry's, I think I understand it better now. A few questions on topic, and then a few responses to your assumptions on ATG which may be OT to this board (sorry). Question 1 - If Rose Glen did not hedge, would it not be the case that the additional selling at the point of conversion (which is presumably why they would trigger the conversion) would be somewhat equivalent to the introduction of common stock into the market which will occur if and when they establish a hedge position? Q.2: And does the hedge position not require them to take on debt or put out cash to establish the short position (in addition to the $20 MM they just spent establishing the long position), which would reduce the IRR on their investment pretty substantially if the stock simply goes up in price from here? Q.3: If they do establish the hedge, and the stock price does well because of extrinsic factors (more or less forcing them to use the conversion stock to cover the hedge), would not the absorption of shares at the point of conversion due to covering activity diminish the selling pressure that would otherwise have occurred at that time had the hedge not been established (and they were simply flooding the market with common rather than covering)? It all seems circular in the end, and maybe, as a result, somewhat more dependent on the company's own performance extrinsic to the stock ownership and trading activity than reading this thread (which I still think is fascinating) might suggest. Second, some responses: If VWAP in the US were ATG's only potential revenue producer, I might agree with you that diminished overall volumes in the US markets should give rise to caution. But not entirely - and I have 3 separate responses -- first, the media reports suggest that reduced volumes appear in large part to be due to a reduction in retail trading activity (daytrading and on-line brokerage) -- I can't say I have read more than a few media (WSJ, etc.) articles on the subject, which begs the question of whether there are statistics indicating that institutional trading has dropped off to the same extent as in the retail area (which does not generally constitute an important participant for ATG's VTS system, which has a minimum 5,000 share order and a derivative pricing mechanism geared almost exclusively for institutional trading and especially useful to index funds, public employee retirement systems and other ERISA plans). Second, VTS launched Friday. As a revenue producer for ATG, it is going from nothing to something. If average volume in the NYSE is 600,000,000 per day, VWAP trading is 8% of that (48,000,000 per day) and ATG gets only 20% of that (9.6 million per day), at an average rate of $0.015 per share, even at diminished volume numbers, that is more than $35 Million per year in gross revenue to ATG from one system. Last year, its revenues from trading systems was -0-. Third, ATG is much more than VTS as currently configured in the embryonic stages of a pilot program in the US - it has initiatives in process that may come to fruition in Canada and China (with VTS), it is expanding VTS in the US to include NASDAQ stocks and several intraday interations designed to appeal to existing institutional trading behaviors (all of which should be easier to obtain approval over due to Reg ATS, and all of which the system is designed to execute once regulatory approval is in hand), it has other systems within the UTS platform besides VTS (eOX and eAS) that have been in development for 2-3 years and just received a $20 Million shot in the arm to speed their delivery to the market, and they have the eMC transactional website that also will use some of the $20 MM in funding. And, they have 5,000,0000 shares of Gomez that may turn out to be worth a lot more than what they invested in Gomez at its creation. Which is to say thart it has a lot of things happening that could give support to the stock price over the next 6-12 months. Still, this is not a sales pitch for Ashton, but simply pointing out that not all of ATG's eggs are in the VTS basket. No question that it would be prudent to watch this carefully in February (and between now and then). But I am not ready to jump off any bridges because of the Rose Glen PP, and still think it a huge positive for the company (as i did the earlier floorless that they did, which saved the company from insolvency which might have resulted from interminable regulatory delays). Thanks as always for your insights and explanations -- I do value them. Mark