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Pastimes : Investment Chat Board Lawsuits -- Ignore unavailable to you. Want to Upgrade?

To: Kevin Podsiadlik who wrote (7817)	4/7/2005 1:20:48 PM
From: Jeffrey S. Mitchell	Respond to of 12465

I think we all agree that convertible preferred deals (aka toxic convertibles, death spirals, etc.) will kill a stock price. It's debatable whether those entering into such deals do so a) out of full understanding of the ramifications, b) because they were promised "my firm won't screw you", or c) blindly out of sheer desperation for working capital. If you believe the anti naked short crowd it's "b" to the exclusion of all else. Putting aside the issue of "why", I'm really wondering just how much these deals can be considered blatant naked shorting. Let's not forget that the people doing the shorting have debentures that are convertible to shares. It's like borrowing against a (secured) promissory note. Technically you don't have the borrowed item in your possession, but you have strong collateral. The other issue at play here is the time-to-cover period. Obviously if you go past T+3 you have fails to deliver. In the end you do deliver, but, technically, you have exceeded the prescribed time limit. Compare that to what is being touted as the textbook definition of naked shorting: simply selling stock that you haven't actually borrowed and never intending to buy it back to cover. Yet, all the horror stories cite examples of the former scenario -- which requires some form of formalized complicity with the target company -- as opposed to the latter, which is only presumed to exist. So, once again, we have a movement with no real clarity. They lump all these things into a pot labeled "naked shorting" and mix them up to the point they confuse even themselves. Sprinkle in a bunch of false-alarm poster child penny stocks and it's easy to see why if the anti naked shorting folk were part of a corporation, it would be time to pick new management. - Jeff