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

To: Robert Cohen who wrote (16002)	11/12/1999 3:10:00 AM
From: Larry Brubaker	Read Replies (2) \| Respond to of 27311

Robert, your post appears to be addressed to me. I don't want to speak for the bandits, but this is the way I see their perspective. They are providing funding to a company that cannot raise money through more "legitimate" sources(Lev even used this word today in the exact same context). Without the bandits, the company would go bankrupt. They are providing the means for the company to survive. However, the very reason that the company cannot attract "legitimate" financing is because it is a very risky proposition. Therefore, they structure the deal so they cannot lose. They make money if the price goes up, they make money if the price goes down. A hedge fund manager is investing other people's money. The fund owes a fiduciary duty to their investors to maximize profits. In most floorless financing deals, maximizing profits for the hedge fund means converting at a low price. The hedge fund owes their investors a duty to maximize profits, and therefore, will use every means legally within their disposal to fulfill their fiduciary duty to their investors. In the case of VLNC, Castle Creek originally gave VLNC a 6-month window of opportunity to perform before the floorless provisions kicked in, then extended this to 12 months and waived the floorless provisions on the first tranche. After 12 months VLNC still had not performed and Castle Creek implemented their floorless (IMO). You may also recall that our inside knowledge posters assured us way back in July 1998 that VLNC would have no problem getting contracts before the original December deadline. <<What makes me mad is the attitude that a concerted group of financially well healed individuals has the power to attack start-up companies and cause them to fail in the hopes of making a buck.>> One could argue that the floorless bandits actually in most instances prolong the existance of failing companies long after they would have otherwise been left to die by the market (because they cannot raise money through "legitimate" means). And finally, there are examples of companies (e.g. ANCR) that survive their floorless and prosper. While in the case of ANCR, the bandits exacted their pound of flesh, they may also be responsible for saving a company that may have otherwise failed. What irritates me about the bandits is they earn large rewards for actually taking very little risk. That and the fact that most shareholders of companies forced to resort to using the bandits never know what hit them. I would be quite happy to see this type of financing outlawed. But if it is, you would see more companies go bankrupt earlier due to the lack of "legitmate" financing. And you might lose the occasional ANCR (and maybe VLNC) that makes a success story out of the ashes of floorless financing.