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Strategies & Market Trends : Three Amigos Stock Thread -- Ignore unavailable to you. Want to Upgrade?

To: Sergio H who wrote (25280)	6/3/2001 11:09:47 PM
From: Ken W	Read Replies (2) \| Respond to of 29382

Sergio Buying back or cashing out the perferred convertibles results in a reduction of the short position. The conversion of convertible debt to common dilutes the stock by what ever the converstion rate is. RSTO has made two different financing deals with convertible shares involved. One at a conversion price of 2.00 which as already diluted the outstanding by nearly 30%. The second is just now being released for sale (another 4.5mm shares) which were purchased at 5.43 per share. As the price moves below that level the registered sellers of the stock begin shorting the stock to hedge their position (the same as writing covered calls) as the arbitrage. RDRT has had the same problem from the outset due to State of Wisconsin Board. They did reduce some of the convertible which reduced the short position, however, they borrowed money to do this from WISB. WISB became the arb. and has consitantly driven the price downward from 10. Ken