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

To: David L. Hoevener who wrote (1314)	6/30/1998 4:01:00 AM
From: Q.	Respond to of 2506

David, I remember having read some filings for PLC, which is a development stage co. hoping to sell a CO2 laser for heart surgery. In response to your post, I quickly looked at the financial statements and a recent S-3 to re-familiarize myself with the co. and the private placements. The co. is a typical customer for discounted convertible private placements: * development stage, * no revenues to speak of, * burns $10 M per year cash, * small market cap ($200 M). The private placements were discounted convertibles with a zero percent discount plus warrants. The size of the placements was about 10% of market cap, which as a rule of thumb is average for these deals. So you might not expect the selling to have a some effect on the stock price, but not necessarily a profound effect. In fact, the conversions all took place in Sept. 97 and Jan-Feb. 98, when the stock price was flat and strongly up, respectively. There was another, more recent private placement where the conversions at (zero percent) discount can begin July 22. The selling shareholder is Southbrook, which is one of the usual offshore funds for these deals. This deal is for 5% of market cap, in two tranches of 2.5% each, so it is likely to have even less effect on the stock price IMHO. The S-3 can be found at edgar-online.com I think that in this case, the discounted convertibles serve well to draw your attention to a co. that might possible be bad. The co. itself might be so poor as to merit shorting the stock based on the bad cash burn and limited prospects for sales, but I wouldn't short it based on the convertibles alone. If you have researched the 'story' aspect of this 'story stock', I would like to hear more about it. Also, why does the chart look so funny in April 98 ? tscn.com