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Technology Stocks : IFMX - Investment Discussion -- Ignore unavailable to you. Want to Upgrade?

To: Marq Spencer who wrote (10948)	5/22/1998 9:10:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 14631

My rough calculations for Class B preferred given the amount Fletcher paid for it and the number of shares common that it has converted to, I calculate a cost basis of the common for him also at approximately $4 per share. So this individual and his company has a wide profit margin to work with. However, being the businessman he is, I am sure he will try to capture the largest profit possible. I do not think he has been selling since the drop from just below 8. There has been little buying interest except for the part of the first day of the drop. I do not think a person that holds as much of the outstanding as this guy does will normally consider selling in the current environment. For that matter, what he can manage to get off without depressing the price of the stock itself would be insignificant to the total amount he is interested in selling. However, given the downward bias of the stock since its breakdown from 8, and the increasing negative sentiment since the press on the restated earnings, I do think he may be be willing to revise downward his selling target. Also, IMO as the price continues to approach 6, he may even start to sell pieces to obtain what profit he can instead of seeing his profits disappear. I think this can peg the price of the stock at 6 since I have seen demand come in at this price for the stock which has provided support to the stock. He has a significant part of the shares outstanding to sell in a market that may not support this supply. As long as he continues to find himself in this position, he will not be converting any more warrants to preferred. So IMO Informix will be not seeing any cash flow from him for the forseeable future. This will place Informix in an awkward spot where they may have to tap their "Credit Facility" to remain solvent. Meanwhile, I would not be surprised if Fletcher is attempting to place the additional warrants he has on hand in another private interest's hands at a discount in order to recoup some lost profits if the price of the stock were to continue down. Informix does need the cashflow the company has been seeing from Fletcher. Furthermore, while Informix is attempting to turn an operational profit, a drop in cash flow will add to their formidable burden of remaining solvent. I think this quarter and next is the "make or break" period of time for Informix. There is allot of limitations that has become part of the picture now which Bob F and Informix will need to be dealing with just to prove future solvency. I am not even talking about turn around. Proof of solvency needs to happen first. The risk to the shareholder is at its highest right now, which I think is even greater than the past two quarters. What is of concern is that even though the risk is higher, if a shareholder were to hold through this period of time and Informix successfully remained solvent and even turned profitable, I do not think the benefits would be direectly at hand at the time this happens. So at least for the time being, the profit to risk profile is poor, but may improve later in the future. If it were not for the "magic" of covered calls, I would be out of this stock right now. The "stalled' market is also helping me to remain patient. If Fletcher were to sell during the current downward trend of this stock, he would need to work through the MM. Actually, I think he would need to do this anyway since I do not think there is enough large interests available in this envirmonment to assume the purchase of all that stock in order to facilitate a crossed sale. So the thing to look for here is a series of smaller transactions of 1K and 2K occuring at the ask with larger block offsetting prints at the bid. This is how the MM works large orders from their customer to sell or purchase. The MM ends up getting the stock at a discount to the current quote. This arrangement would be much better for Fletcher than if he were to sell this stock outright by himself. What you will see is that even though there are offsetting prints at the ask, it will be a net sale of a large block of stock, and the MM would be reluctant to lower the bid because this would cut into the MM's profit. I am going to look at the current narrow trading range to see if this is what is happening. Monday would tell us allot about the future direction of this stock. If there are any buyers, they will step up at the beginning of the week. If the MM continues to lower the price toward 6, then I would say that there simply are not any buyers for this stock. If the stock price jumps to 7.5, expect there to be distribution at that price and a decline following this. Now imagine if you were Fletcher sitting on an outrageous amount of stock like this. I would be getting a little anxious if I were him and I would be looking at alternatives right now including the possible dumping of the stock. Each dollar the stock goes down, he loses potentially over 12 million dollars of potential profit, and this does not include the number of shares he converted to Monday of this week. Ouch! In this negative environment, IMHO there is no way it will take him only several days to unload. He will base his decisons on the near term outlook of this stock. Considering that he made the initial conversion of 12M in Feb when the price was at 7 or below but moving up with buying interest present, he was prepared for a mere approximately 50% to 65% profit. In the present trading environment for this stock, toward the end of unloading this line of stock, he may be even willing to go for breakeven. All this depends on how the near term outlook for this stock and company appears to him. Just some thoughts. Bob Graham

To: Marq Spencer who wrote (10948)	5/22/1998 9:11:00 PM
From: Robert Graham	Respond to of 14631

Going by bigcharts.com, it is interesting to see a spike of 28M shares transacted in Feb which looks to be soon after his initial conversion to common. NASDAQ at least doubles the actual number of shares transacted. So this would make it 14M at most. The stock gapped up and encountered distribution starting with this 28M day. Interesting. This means many people purchased stock at about 8. I am sure many will be willing to sell when the price approaches 8. So 8 will be the future cap on this stock. If Flecher converted another 12M shares like he warned Informix that he would do possibly starting Monday of this week, then there is at least another 12M shares to go, and possibly more, that was converted at a price about 8 for him. If the stock price stays at 7 or below, instead of selling at about 8, Fletcher may be willing to start selling at any price above 7. However, seeing the price drop below 8, he may have waited to convert. Either way, I think this person is ready to sell another large chunk of stock, and if I were him under the present situation, I would see any price around 8 advantageous and would even consider a price around 7 of above. Time will tell. Thank you for your feedback. Always good to see.