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Gold/Mining/Energy : Arcon Energy (MIDL Presently) The Ultimate Sleeper -- Ignore unavailable to you. Want to Upgrade?

To: bmatsuura who wrote (444)	5/23/1998 10:28:00 PM
From: Ga Bard	Respond to of 4142

OK I have been working on this all day to try and explain to the people my take on the MIDL stock trilogy. First I would like to get some definitions out of the way so in my following opinion everyone will know what I am talking about. arbitrage = This is a trading strategy to attempt to profit by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. (stocks vs. warrants/preferred) Ideally, a pair of opposite transactions that take place simultaneously and generate profit with zero risk. This is called convertible hedging which involves buying a convertible security (warrant or Preferred) while simultaneously selling short the same company's common stock. common stock = Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success through dividends and/or capital appreciation. In the event of liquidation, common stock holders have rights to a company's assets only after bondholders, other debt holders, and preferred stock holders have been satisfied. warrant = A certificate, usually issued along with a bond or preferred stock, entitling the holder to buy a specific amount of securities at a specific price, usually above the current market price, for an extended period, anywhere from a few years to forever. However MIDLW exercise price has changed from $1.00 to $0.50. The common target price is $2.50 or above for 10 consecutive trading days or the year 2001 at which time if not exercised the company on 30 days written notice (news release) can recall the warrants for $0.005 (half a penny). Once recalled exercising will have to happen. preferred stock = Capital stock which provides a specific dividend that is paid before any dividends are paid to common stock holders, and which takes precedence over common stock in the event of a liquidation. Usually does not carry voting rights. MIDLP is 35 shares of common stock within each Preferred 'A' series stock on the market convertible automatically on Oct. 1, 1998. The value of the 'A' stock is based on the common and the 'A' is worth $35.00 per $1.00 in common price. Ex. at $2.00 the MIDLP is worth $70.00 a share. dividends = A taxable payment declared by a company's board of directors and given to its shareholders out of the company's current or retained earnings. Usually quarterly. Usually given as cash (cash dividend), but it can also take the form of stock (stock dividend) or other property. Now as per the next to the last news release we discovered we as investors in the stock sudden got to very important keys what is happening with the company in my opinion. The stock dividend on the Preferred 'A' Series (MIDLP) and the exercise reduction on the warrants. How and why is what everyone of savvy nature is asking. Well let try my analysis of this situation. The dividend is in stock form from the treasury. The company could sell this stock to institutional or in private placement to raise capital to build the DF-144 plants. I feel they apparently are not concerned with capital for the plants. Guessing, I am leaning towards a JV or a buy out. Either way that would be the great for shareholders. Also because the company exhausted the treasury any Market Maker knows not to even bother calling to get more Preferred stock because none exist. By the way the treasury is 'A' that is convertible in Oct. 1 1999 after the original 'A' that is trading in the P market is converted on Oct. 1, 1998. As far as the actual conditions of the dividend I do not know so I am awaiting a news release explaining the dividend which should be coming soon. OK now we get down to the warrants and why this particular division of the trilogy is so important. 1.) Lowering the exercise price lowers the arbitrage sell position. 2.) Gives those that own it a cheaper way of exercising instead of momentum trading them. This is the key to the trilogy. Arbitrage is what has been happening to this stock for over a year now. This is why I have been accumulating every week the common and P. The common would not hold a price until were able to accumulate enough for the dollar level and the warrants to move right up behind the common lagging around .50. As the warrants go higher the arbitrage is going to get riskier and riskier. Exercising the warrants is like calling for certificates on the common. It is going to take a few weeks while you await the common certificate. However the exercising serves to purposes. 1.) It reduces the float of the warrants 2.) If there is a short position on the warrants it has to be covered upon exercising. The lower exercise price arbitrators will short sell the common at this low level. Thus selling the warrant in a instant profitable risk free strategy. The float is being accumulated by at this lower level and the arbitrage is not lower the common so they sell short can cover. This is funny because some are losing massive profits when they cannot cover. They have no choice but to exercise the warrant. As this stock gets more and more public attention then the common and the warrants are going to stay within .50 of each other. The more long termers we have the only ones selling will be the arbitrage investors. Watch for dips and buy more before they can cover. Now this is where this stock is at presently ... I look forward to [people with years more experience than my measly 14 months to see their take on this situation. GB