Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : XOMA. Bull or Bear? -- Ignore unavailable to you. Want to Upgrade?

To: aknahow who wrote (6727)	7/19/1998 7:12:00 PM
From: Dan O	Read Replies (3) \| Respond to of 17367

Thanks for the explanation George. I have invested in several other companies that used this form of financing where the other party received more shares in the event of a decline. I really do not like this. It puts the holders of those shares in opposition against the long term investor as they have a vested interest in a price decline. I believe that these types of issues are manipulated more often than not.

To: aknahow who wrote (6727)	7/20/1998 4:10:00 PM
From: schadenfreude	Read Replies (2) \| Respond to of 17367

George, About the convertible preferreds, you wrote: >>With the proper safeguards and when done in amounts that are small relative to existing outstanding shares the non fixed priced c.v.p. financing represents one viable option. >> The question is are there enough safeguards to keep the buyers C.S. First Boston from attempting to manipulate a decline? Probably the threat of a lawsuit is enough once the contract limits such activities. << I'm afraid I'm not as sanguine about the deal. Discounted converts lead to massive dilution and lower stock prices. Managements who do these deals are either naive or have goals (e.g., holding on to their jobs for a few more months, single-mindedly pursuing the "science") which conflict with the interests of shareholders. The offshore funds who bought the c.v.p. WILL short the stock (The S-3 authorizes this.) The more they short and drive the price down, the more shares they'll get when they convert. They'll use their converted shares to cover their short positions. This is risk-free profit. And the public shareholders pick up the tab. Here are couples links about discounted convertibles that you might want to check out: www.forbes.com search for article entitled "Pact with the Devil" dusty.physics.uiowa.edu I'm very disappointed that XOMA has resorted to this type of financing and kicking myself for not selling my shares last August when they announced Series G. I knew better, but I allowed my enthusiasm for the science to cloud my judgement. While the financing allows XOMA to continue to pursue its programs, the dilution significantly reduces the potential payoff to shareholders if XOMA is successful. I'm not sure the risk-reward is favorable anymore. Unless XOMA announces a clinical breakthrough in the near future, selling pressure from the discounted converts will drive this stock lower. Otaku