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

To: Daniel Chisholm who wrote (1151)	6/15/1998 12:32:00 PM
From: Carl Yee	Read Replies (1) \| Respond to of 2506

I am afraid I can't answer your question, probably John G. can. But I have another question for the group. Say you have a stock that goes to near zero. What good does it do you if you can't close it out? Does your broker keep the original equity tied up for the short, or only the current mkt value equity tied up? In other words, when do you get to "spend" the cash from your short? I suspect I don't enough to ask the correct question here. Any help would be appreciated. Carl

To: Daniel Chisholm who wrote (1151)	6/15/1998 5:20:00 PM
From: Q.	Read Replies (1) \| Respond to of 2506

I estimate PAMCE's fair value at around $2. That's based on 1X book value, using not GAAP, but rather the other accounting system used by insurance companies to arrive at book value. When I called a few weeks ago, the outside director who was serving as IR told me that while shareholders equity would fall to a few million under GAAP due to the asset writeoffs, it would not fall at all under the other accounting system. So that would leave 'shareholders equity' under the alternate accounting system (which I'm not familiar with) at about $20 M, divided by 10 M shares out, giving a 'book value' of about $2 under that accounting system. (Book under GAP will fall to less than half a buck.) Based on this, I would be delighted to cover at $1 to $2. I don't think that the co. is worthless. It stinks, to be sure, but it isn't worthless.

To: Daniel Chisholm who wrote (1151)	6/16/1998 9:32:00 PM
From: Brad Davies	Respond to of 2506

Daniel, RE" I have read on SI a bit of a mini-horror story of a real-life small investor going through over a year of hassle with his brokerage w.r.t. this situation." I believe the post you are referring to was mine. I shorted College Bound a couple of years ago through McDermid St. Lawrence (a Canadian Brokerage). After the stock was delisted they informed me that I was on my own with respect to finding the stock to cover with. They also told me that they would not release my margin until I was able to deliver the stock (even though the company was bankrupt at the time). Eventually I sued them to get my money released and during the course of the lawsuit I was told that they were holding margin from many people in similar circumstances and were unable to release the funds by virtue of exchange rules (how convenient). In my case they based the margin on the last trading price before delisting ( approximately 8.00). After a couple of years of frustration (including personally calling cages at brokerages I knew had previously been active in trading the issue), I posted a message looking for the stock on the alt.invest.stocks board (in 94 it still had value), and found some kind soul in Oregon who transferred her stock to me and wouldn't even accept any compensation. The moral of the story: don't be left holding when it get's delisted. Even though you are paying for worthless paper, you are better off than if you have to spend a lot of your time and money chasing the stock certificate later on. Second moral of this story: The brokers are going to make a buck off you no matter what you do. If you hold the stock they will hold your capital, if you cover they will sell you the worthless paper for whatever they can extract from you. P.S. Cangratulations on your home run on Gandalf (I also had it short but covered to early for the really big gains) Ron