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Technology Stocks : Global Crossing - GX (formerly GBLX) -- Ignore unavailable to you. Want to Upgrade?

To: BWAC who wrote (11304)	5/17/2001 2:59:09 PM
From: akmike	Read Replies (1) \| Respond to of 15615

In my experience when good companies issue convertibles they are doing so because it is a beneficial, less-expensive method of raising needed capital. The conversion price is usually above the market at the time of issuance for growth companies that don't pay dividends such as GX. The financing is attractive as a "layer" of capital because the dilution would be significantly less than an outright issuance of common stock. The fact that dividends on preferred stock have tax advantage status to some institutions also allows the dividend rate to be below a corresponding debt rate in some cases. I think that if you went back and looked at GX issuance of convertibles and substituted instead a corresponding issuance of common at that time to raise the same amount of dollars you will find that stockholders have come out well.

To: BWAC who wrote (11304)	5/17/2001 3:12:09 PM
From: Mama Bear	Read Replies (1) \| Respond to of 15615

". Sell immediately short at $45 since most converts have a bit of a discount built in." Most, if not all, fixed converts are have a conversion price higher than market. There would be no point to issuing the instrument at a discount, as ready buyers can be found for stock issued at a discount. Regardless, the shorting of the shares is not what makes the price go down in the above example. "2.)Pressure the market down with the hedged convert short shares." If the stock is worth more, the market won't be pressured. Again, it's not the shorting that is the culprit. "Short into strength, cover on weakness, reshort, reshort, break the chart down a little, then let the momo bunch take over and pile on the downtrend. " In this example you seem to think the shorting drives the price down, but the corresponding buying has no effect. "There's always time for the shares to go up later, closer in time to the convert date, for the hedged holders to profit to the upside as well." Something that you don't seem to understand is that these transactions are mostly entered into for income. Income traders do not have the same objectives as someone who is trading for growth. Regardless, you seem to think that these folks can say 'fall', and the market responds, 'how low'. Were that true, why bother with buying the convert at all? "Eventually reach a level where it is no longer sensible to be short. Cover for the last time. Locked in short profits. " If it is sensible to short the stock, then the stock price is too high. It was then sensible for the company to sell, or hope to sell, the stock at the conversion price. I think the thing you are missing is it is the company which puts the shares into the market. ".)Let natural trading, natural business conditions, natural buyers take the price back up. This assumes that the trading done to hedge a convert is 'unnatural'. That is simply untrue. "Convert at $40, hopefully holding a stock selling for $90. At least you got one right. "And you full well know that none of this is provable, nor can any direct referenced example be found. It's not only not provable, it's disprovable. But of course, all whacked out conspiracy theories depend on this sort of reasoning. ""it doesn't happen" coming from someone who always seems to be short and piling on ala CNC doesn't ring as genuine to me It really doesn't matter what rings genuine to you. If my position as stated here doesn't, then you need to recalibrate your perceptions. I shorted CNC because I believed it was a good risk/reward ratio. In fact it was, although not as good as i perceived when I entered. It is your misperception that sees it as 'piling on'. It is also your misperception that shorting drove down the price of the stock. But far be it from me to argue with someone who believes in conspiracy theories. Regards, Barb