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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Alan Lee who wrote (1029)	5/11/1998 5:20:00 AM
From: Q.	Respond to of 2506

Alan, re. HEPH, thanks for the heads up. The co. is a development stage biotech with a market cap of a little over $100 M. This is a very common type of company to seek funding through a floorless convertible. Typically such a co. has no revenues for many years, and due to the small market cap they are unable to do an ordinary secondary offering. The $17 M private placement corresponds to 16% of market cap, which is higher than typical, and therefore of interest to shorts. There aren't any 8-k or S-3 filings yet to look for details of the placement, so we'll have to watch for them. One question is whether the holders of the convertibles will be motivated to flip and sell. The news release indicates that existing shareholders bought into the placement, and that does not favor rapid flipping.