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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: augieboo who wrote (83511)	6/22/2002 5:49:25 PM
From: Bruce A. Thompson	Read Replies (1) \| Respond to of 99280

Not so typical ending to the Death Spiral story...This one is a mouth full, and beyond the parameters of the available space but here goes. Around 25 million shares fully diluted. Available float is 14 million. Short around 55 Million. Not a misprint It's on this very point that one alleged victim has decided to fight back. Gary Valinoti, chairman of JagNotes.com, a tiny media company, needed cash to build a TV station for his online stock-news service. So he agreed to take down $10 million in convertible preferred financing. It seemed to be a better deal than selling common at $3 a share. As soon as JagNotes booked the investment, the share price began to fall. Much to Valinoti's puzzlement, the stock continued falling, in good times and bad. He was further baffled by the list of large shareholders, required to disclose their holdings each month, which showed no selloffs. And yet by February 2001, the stock was trading at 10 cents. "Everybody I knew was buying, but who the hell was selling?" Valinoti wondered. He concluded it had to be naked short-sellers. Instead of suing his tormentors, Valinoti decided to call their bluff. In February 2002 he announced a recapitalization plan, reconstituting JagNotes common stock into new Class A and B shares. To receive new issues, shareholders had to hand in their old stock certificates. The recap took effect Apr. 8. As brokerages began sending in certificates on behalf of their clients, gaps appeared. Citibank's beneficial holder list, for example, accounted for 6,300 shares; one investor claimed he owns 1.2 million shares through his Citibank account. Brokerages that didn't bother to demand certificates when clients bought JagNotes shares are in a jam. Morgan Stanley has a deficit of 500,000 shares, reports JagNotes. UBS Paine Webber seems to be missing 252,000 shares. Eventually brokers must collect from whoever sold them the phantom shares. Meantime they may have to buy on the open market to cover their clients' positions. That should drive up the shares of JagNotes and generate a windfall for Valinoti, who owns 5 million shares. Recent price: 39 cents.