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

To: gaohong xie gary Xie who wrote (5467)	3/24/1998 10:55:00 PM
From: Pancho Villa	Respond to of 18691

In general, secondary offerings of stocks and convertibles (bonds and preferred stocks convertibles into common stock) are considered to have a dilutive short term effect in share price as the perception is that the pie is not any larger but will now be divided into more slices (i.e., a dilution of earnings per share is expected which in turn reduces share price). In the case of BFIT and other stocks going up despite the expected dilution all I can tell you is that in this irrational environment there are many things that escape a rational explanation. In terms of manipulation, in the case of BFIT I would not say there is conscious manipulation of the stock. But it is a fact that a group of deep pocket MMs jumped at what used to be a small cap stock and cornered a significant fraction of the float(my estimate is that MMs and insiders may control over 70% of the outstanding shares). IMO the MMs have adopted a wait and see attitude. BFIT is a small fraction of their holdings and the money isn't theirs anyway, so they will hold until the S..t hits the fan. As soon as any or several of them starts selling we will see very significant price erosion. Dumping a couple million shares of a stock with an average trading volume of around 200K shares/day is a pleasurable event to watch [if you are short the stock!]. Guving a detailed definition of common, preferred stock, bonds and other financial instruments is time consuming. Introductory MBA level books in Finance and Financial accounting cover this material in significant detail. pancho