To: Steven Seefeldt who wrote (2085 ) 2/16/1998 5:09:00 PM From: rl Read Replies (2) | Respond to
I don't know exactly what you mean by "pump and dump." I'll assume it has to do with buying in and hyping a stock long enough for it to go up and profitable sales can occur. That is not the case in the SALV transaction. Scenarios that have happened in the past go like this; offshore buyer acquires large chunks of stock in US company through foreign vehicle (usually these individuals are US citizens, but have placed money in fronts in Swiss and other accounts); stock is bought at a discount to trading price (in the range of 20-50%); historically, the stock could not be sold for 41 days, now 1 year; these Reg S transactions began not passing the SEC smell test, so the format changed to Reg D Convertible Debenture deals; the buyer (sic, investor) covered his money primarily by the knowledge that he would be selling large blocks in the near future and the stock price would fall. They bet on the downturn and establish a short position based on a formula developed for these types of transactions; the investors have large blocks at a discount to cover their short sell. Ask yourself, why does SALV trade such large volumes? Trace the conversion dates of the last financing and you can see the obvious trend. I would expect that the last "investor", Tailwind is out of SALV stock now. I would also guess that they didn't lose a penny. If you know any management at small publicly traded companies, ask them how many times per day they are asked to do these types of financings. They are almost like boiler room operations. The stock never goes up with the company receiving the money until the investors have sold their stock.
