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

To: Bluegreen who wrote (6739)	7/20/1998 5:28:00 PM
From: schadenfreude	Read Replies (1) \| Respond to of 17367

Don't you think you should be a little less myoptic and ask yourself >>who is going to buy all those shares? Shorting a stock to get more worthless shares? There is the BIG risk in driving the price down. Now the offshore entity has all those shares to sell. Good luck if it is a weak company to begin with. Once again someone HAS to pay you more money than you have in the shares in order to make a decent profit. It might look good when you are shorting and driving the price down but that is only HALF the battle. Now you have a beaten down the price and you want to magically unload your shares? Guess what that does to the price? << So what you're saying is that the offshore entity is stuck with a large long position and a large short position? Guess what, they cancel out! Here's a numerical example. Say the investor has $1M worth of convertible preferreds. He shorts ~380K shares at an average price of $4 for proceeds of $1.5M. The price goes down to $3 so he converts. At the minimum 12% discount, he gets ~380K shares ($1M/$3x88%). He uses the shares he gets from converting to cover his short position. He now has no position in the stock (except for the warrants which sweeten the deal). More importantly, he has a $0.5M or 50% profit. Not bad for no risk. Obviously, there's no guarantee that he'll make that much. But he can't lose, either. Get it?