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Technology Stocks : Cymer (CYMI) -- Ignore unavailable to you. Want to Upgrade?

To: nycnpbbkr who wrote (8429)	11/5/1997 9:46:00 PM
From: D.J.Smyth	Read Replies (3) \| Respond to of 25960

NYC, of course this is what has happened. it really isn't a question of "did they are didn't they" in my mind. as you know and as you and i have indicated in the past, shorting against falling par value is simply a hedging technique - these institutions don't dislike CYMI or disbelieve in its product, they are simply protecting their original investment. they were probably advised to do this at some point by Bret, Jay in concert with State Street. we both pointed this out last week. why someone thinks this is unusual is beyond me. the unfortunate facts here is that the small investor is getting induced into shorting CYMI further.

To: nycnpbbkr who wrote (8429)	11/5/1997 10:13:00 PM
From: Jess Beltz	Read Replies (1) \| Respond to of 25960

Ken, point well taken, however i would like to say the following. (1) The cap protection offered by the convertibles is only for short sales covered if and when the share price climbs above $47. (2) The only way the short seller has zero risk is if he enters into the entire short position at the conversion price, which is not possible in this case, and not supported by the short interest data that we have. (3) The short seller has limited but still substantial risk on any short sale below $47. (4) Let's not forget that the debt issue was requested by and raised for Cymer! It was not some artifice created out of thin air to provide a vehicle by which short sellers could pound the stock with impunity. They (the company) aggreed to attach the equity kicker to the debentures because the option had value which they could realize by paying a lower interest rate. At the time the debt issue was being drawn up, the stock price was on a rocket trajectory and the option value was real. It is only ex post that the bonds are seen to have another possible use, ie the cap for short sellers. (5) Again, the reasons for the initial slide have everything to do with what happened at the Needham conference. This is a classic case study in the development of conspiracy theories. There is one coincidental fact here, that of the last reported short interest and the number of shares that could be generated by a wholesale conversion of the bond issue. A series of highly improbable or questionable "coincidences" merits serious investigation. If we step up to the plate at the SEC with a history of some rumors and one coincidence, we're asking to be burned to the ground. jess. PS - stay in touch. I'm glad you're investigating this. jb.

To: nycnpbbkr who wrote (8429)	11/5/1997 10:47:00 PM
From: John Bloxom	Read Replies (2) \| Respond to of 25960

On the convertible bonds/short theory.... Here's my take: 1. The 2/1 split and the bond deal were done the same day, August 6. Therefore the conversion price is post-split (indeed, the privilege couldn't be exercised until November 1). 2. The bonds have an initial yield of 3.5% and a blended yield of 5 and change. Since you can do those those numbers in treasuries or high grade corporates with little or no risk, it is clear that the inducement in the bond deal was the conversion feature. Therefore, the bondholders bought the bonds believing that the price, which was $40.25 to $41.125 on 8/6, will easily and substantially trade through the $47 conversion number. 3. After 8/6, the stock traded on thin volume penetrating the conversion price on 8/22, 8/25, and 9/4. On 9/4 it reached $47.625. 4. On 9/5, the day CYMI pulled out of the conference, the stock traded from $46.3 to $41. Volume was (an enormous) 5,552,800 shares. 5. On 9/5 a bondholder, in effect owning a call at $47 on an issue trading almost on that number, seeing panic in the marketplace taking the price down, would have to have been, well, foolish, not to have sold short that number of shares into which his or her bonds were convertible. Even at the intraday low of $41, he or she would pocket $41 up front while risking only $6 (being the difference between the receipt on the sale and the amount required to cover by converting and selling). 6. Since the conversion feature operates as a stop loss only on the short sale, it has no effect at all on the price at which the bondholder will cover. He or she will cover as low as possible, jut like any other short. 7. Since the bonds are convertible into only 3.6MM shares, and therefore a maximum of 3.6MM shares only could have been sold short on this theory, given the extraordinary volumes in this issue, at best this theory is a partial and incomplete explanation of the recent price activity. 8. We have no clue whether the bondholders, in fact, sold short on 9/5. 9. Even if the bondholders did sell short on 9/5, they did so because of the fortuitous confluence or near confluence of the conversion price with the market price on the presentation of bad news. So even if they sold short they do, nevertheless, believe that the future price of the stock will promptly go way, way through $47. If they didn't believe this, they wouldn't have bought the bonds in the first place for the simple reason, noted above, that the yield is uncompetitive. Hats off to Emile for presenting this to this board. Until he drew the picture, I confess I couldn't see it. Regards, John