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

To: Dale Baker who wrote (1059)	5/14/1998 5:38:00 AM
From: Q.	Read Replies (1) \| Respond to of 2506

Dale, if the y2K efforts don't produce significant revenues, I assume ZITL won't be worth a fraction of its present $100 M market cap. Its investment in Matridigm is $7 M to date, so that might be a clue as to how much the whole company is actually worth. I'd guess holding out for less than $2 a share is not unreasonable, if you are patient. Even though they face a liquidity pinch, bankruptcy is not possible anytime this year IMHO. As long as the market cap is north of $30 M and there is good volume, they will be able to continue to get discounted convertible private placements to sustain their cash burn of $3M per quarter, so don't expect a bankruptcy this year. Best scenario for shorts is just a long slow grind down with lots of share selling by Reg. S sellers. If that's so, then buying puts is a bad way to play it, as the erosion of the time value might offset any gain you get from a slow decline in the stock price. Maybe it would be better to short the equity or the calls.