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

To: mst2000 who wrote (921)	8/30/1999 3:10:00 PM
From: Zeev Hed	Read Replies (2) \| Respond to of 1438

Mark, they do not pay interest on borrowed stock, they would pay the dividend if ASTN was paying out a dividend, but seems an outside possibility. The funny thing is that being a large institution, if they shorted let say 1 MM shares at $10/share, they will be paid $10 MM, on which they can either get interest or if they wished lay out on another debenture, while still collecting interest on the ASDTN debenture they have. However, if they wanted to go in (let say at $7) and cover that short, they will have to come up with $7 MM (or $3.5 if they wanted to go on margin, but in that case pay interest on the $3.5 MM margin). That is why from Glen point of view they should short as much as possible for their $20 MM (the ceiling is around what $7.8 or $10, I forgot the details) above the ceiling. They then earn an "infinite" interest rate on their original investment, whatever the stock does. Zeev