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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: Saul Feinberg Jr. who wrote (9724)	7/30/1998 4:48:00 AM
From: Saul Feinberg Jr.	Read Replies (2) \| Respond to of 42804

Ed, additionally, This seemingly "arbitrage-like" position, Seth just described, is not completely riskless. Depending on the following variables: interest rate, time to maturity, stock price, the discount of the bond varies. Essentially as holders of the bond you can lose money if the bond price drops and you don't intend to hold until maturity. And although there is a force that tends to pull back the price of the stock (as the holders of the bond sell short), the stock price still behaves independently, or freely (in other words, it does NOT to trade at 21+. For example if mutual funds think it's worth 20 times PE, or 25 dollars, they might buy until it is 25, so on and so forth), so there is a pressure to cover by the short sellers. Note also, that I don't believe, all 4 million shares are shorted against the bond. So the naked short sellers might have to cover too. Again, the gist is "there is short interest out there" and "there is a pressure to cover". Who knows how many percent of those 4 million + shares are "sort-of" protected by the "short against the bond" people. I say "sort-of protected" because it is not completely riskless. And considering not all the "short against the bond" people will hold until maturity, at some point, they have to cover ... you know what i mean.