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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Larry Brubaker who wrote (14100)	9/1/1999 11:00:00 AM
From: kolo55	Read Replies (2) \| Respond to of 27311

Sorry I got your fur ruffled Larry. When I hear that an investor has a "no lose" proposition, with tremendous opportunity for profit, I must admit it raises a credibility question in my mind. This was the "theory" we were talking about last March... you kept saying CC had a "no lose" proposition. They might have a greater reward probability than risk probability, but they still will lose if Valence fails completely. CC has invested in the eventual "success" of Valence, not the "failure" of Valence. The issues of SEC disclosure, preferred convertibility, short selling history, were used in our discussion last March as we tried to determine if CC had a net long position, or was truly ambivalent about the eventual success of Valence (as you repeatedly claimed). The theory we were discussing regarded the intention of CC in making the investment in Valence... you claimed that CC did it to make money off the variable conversion and shorting against the preferred, and wouldn't willingly hold a net long position in Valence for long. I countered that CC's major intent was to make money as Valence succeeded. Paul

To: Larry Brubaker who wrote (14100)	9/1/1999 1:09:00 PM
From: Rich Wolf	Read Replies (1) \| Respond to of 27311

Larry, my position is that Castle Creek covered their continual shorting this spring, so that their net short position did not increase, and they retained a net long position of over a million shares (plus 900,000 warrants). They have since confirmed this to the company, as calls to Valence have indicated. This is very different from your theory, that Castle Creek simply shorted, and relied on the unconverted preferred shares to eventually cover their short position. As Paul has emphasized, retaining such a large net long position clearly puts their capital at risk if the company is not a viable concern. The indications are that they hedged in and out in order to lower their cost basis, but that is all. The fact (if true as claimed by CC) that they retained a net long position indicates they see more benefit to the upside than to the downside. What was anomalous was to see the increase in the short position during this time. The most reasonable explanation I can see is the one I described, that Castle Creek simply did not use the long shares they acquired on the downswings to close their short position. Now there could have been others who shorted on the upswings, and who are now holding those shorts right now, and must eventually close their position. When the variable conversion is closed, these other players will have to cover. How it plays out here depends upon how much risk those who short here are willing to accept. The daily trading action indicates isolated attempts to manipulate the stock down, by flipping of shares between some of the short players and their MM intermediaries. However, every time someone intercepts the pass, and takes 10-30,000 shares out of circulation, these short players become more exposed and they run for cover. Similarly, whenever they move the ask down and someone snaps up the shares they offer (someone took shares away from them at 4'3 today), the ask has more tendency to jump up quickly (compared to a few weeks ago when the stock was in the high 5s and the selling was much more aggressive, and the ask refused to budge). Even a modest amount of short covering, or more aggressive buying from those currently supporting the stock (company directors possibly? we'll know after Sept. 10), or any meaningful news event relating to the company business, may result in significant upticks in the moving average for the conversion. Would Castle Creek pass up the opportunity to convert at 4 1/4, say, if the conversion price moved up 10-20%? We may know the answer to this soon enough. It would appear that the stock is finding a bottom in the low 4s and we'll just see how it plays out from here.