Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Roger's 1997 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: tcarnes who wrote (8647)	12/19/1997 6:08:00 PM
From: Bill Wexler	Read Replies (1) \| Respond to of 9285

I have no clue who bought the new issue. As far as "dilutive ass-backward" convertible my reasoning is as follows: 1) Weak companies will do these convertible deals with offshore investors in order to get quick cash at the expense of dilution for the current shareholders. The convertibles usually have very advantageous terms as far as the debt-to-stock conversion price for the lender. Many times the lender will immediately short the stock after floating the loan, locking in a guaranteed profit no matter what happens to the stock price before the conversion date. 2) The shares of the new company are tied to warrants for BVF - very unusual. 3) BVF can call back the stock+warrants at any time between now and 2002 for a fixed premium (which hasn't been disclosed yet). 4) This deal was done in Bermuda. I still haven't worked it all out on paper, and I still don't know what BVF has to pay to call the stock back, but I'll bet that when the puzzle is finally put together we'll discover that: - BVF just set up a worthless shell company. - A great deal of INP's initial capitalization will flow back to BVF. - The deal is dilutive to the current shareholders. In essence....an ass-backward convertible.