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 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: T. Mann who wrote (5609)	3/27/1998 7:42:00 AM
From: Pancho Villa	Respond to of 18691

TM: This is an interesting vehicle: A preferred with no dividend (cool!), that carries a three year warrant attached to it! I am not an investment banker but IMO the main objective of packaging the offering this way is to avoid as much as possible price dilution of the common stock (of course this assumes that investors not see beyond their nose which may be right!). I would have to read the whole prospectus but it looks like the so called "preferred" caps the conversion price into one share of common at $36 and also gives you a warrant (long term option to buy a share of stock at $39). As an investor, assuming of course that you are investing in the company because you like its prospects, the so called preferred looks actually as if it where a share of common stock plus the price of the complicated option. Thus you would pay more than you would for a share of stock (i.e, price of the common plus price of the option). In theory this offering should be dilutive but if the market perceives that this injection of funds will help them to finance investments in projects that will greatly enhance shareholder value (i.e., investing in projects with huge positive present value, as most hype biotechs are perceived) then you may even see the price of the common continue to go up! In this crazy market where all pieces of information are looked at with a bullish overtone (for example, I have already read pieces in which any action by the Fed next 3/31 is considered bullish! regardless of whether they increase, decrease or leave the rate unchanged!). Just the details of the financing don't tell me much about whether this is a good short or not based purely in expected dilution. I would be much more interested in shorting when close to the time in which investors finally discover that this stock is just hot air. If they take o couple of years to find out it doesn't matter that you may be right, going short would mean that you suffer for a while! Bottom line if you must go short take a small position. Pancho I hope this was of some help!