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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: vegetarian who wrote (1008)	1/20/1998 10:31:00 AM
From: Dale Baker	Respond to of 18691

CFON - there is no limit on discount convertibles. You can dilute your company into oblivion if you are desperate/greedy/crooked/stupid enough. ADSL - I don't know any details beyond the Infobeat market alert which I posted. Could be a variation on ADSL though they didn't involve any of the main ADSL companies.

To: vegetarian who wrote (1008)	1/20/1998 10:49:00 AM
From: space cadet	Read Replies (1) \| Respond to of 18691

I don't know any details about the 19.99% limitation, but as I noted earlier the same limitation seems to be in the esmc deal as well, which is why it also appears not to be a true floorless convertible. In both cases I don't understand how the company will deal with the problem of the stock price collapsing enough so that more than 20% dilution will take place. Presumably they will buy back the remaining unconverted shares but with what money? With these kinds of companies the money will be immediately spent so I am suspicious. I recommend everybody take a quick look at hvsf for the games that a truly sleazy company can play with a convertible. They announced the deal when it was 1 (at that time I warned everyone on the thread to get out) it shot up to 2 right afterwards, then slowly sunk to 30c at which point they did a sweetheart deal (perhaps illegal?) with themselves (i.e. the executives of hvsf) and apparently used the money to force the shorts to buy back their shares thus forcing the price again over 1. It is now collapsing again, last I saw was 75c. Anyway these are the games that companies play with these things, though in the end the dilution is real and does have its intended effect (i.e. the stock does end up lower). ESMC was a perfect short because unlike cfon and others it had been hyped up to an unsustainable level. This collapse is before the shares have been released and I suspect the mm's will play with this stock for a while before letting it peacefully rest at a dollar or so. I think I may cover soon and hope for some kind of manipulation bounce.