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Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (3)	7/31/1998 7:43:00 AM
From: Ga Bard	Respond to of 1438

Number 1. Pet Peeve ... Reverse Splits, Convertible Debentures, Reg S, Numerous 144s (selling) GB

To: Zeev Hed who wrote (3)	7/31/1998 1:53:00 PM
From: Jack of All Trades	Respond to of 1438

Zeev, could you comment on this issue for me. Message 5374363 Thanks, JeffG Also in NH

To: Zeev Hed who wrote (3)	7/31/1998 2:13:00 PM
From: ronayre	Respond to of 1438

Great post Zeev, thanks for clearing up some of the cloudy aspects of this practice. I've been burnt before by these floorless bandits (stupid mistake of not paying attention to my issues in my early days of trading) and didn't really understand how this all works to the disadvantage of the investor. RR

To: Zeev Hed who wrote (3)	7/31/1998 7:45:00 PM
From: Harold Feller	Respond to of 1438

Thanks Zeev: Will save your post to pass on. These stocks make great short candidates. My broker only allows shorting of $6up. Almost free money if you can find one.

To: Zeev Hed who wrote (3)	7/31/1998 9:06:00 PM
From: drjoedoom	Read Replies (1) \| Respond to of 1438

Zeev -- You're intellectual powers seem to be waning. Any nitwit could see that your explanation of "the way the floorless bandits make money" is seriously flawed. Here's your basic scenario: << Let us assume that the size of the debenture is $10 MM, and that on the issue date the stock into which the floorless is convertible is at $10/share. When the buyer of the floorless has a piece of paper in his hand saying that he owns the floorless, he deposit it in his "margin" account (he might not even have paid for that since in such PP actual payment can be delayed until "closing". He now shorts 1 MM shares which is exactly the face value of his floorless. This shorting will "soak" buying power from that market, particularly if the issue trades only few hundred thousand shares per day. Note, that with his $10 MM that he got he now pays for the floorless (or replace the money he laid out for the floorless). Thus he has no more money committed to this stock whatsoever, but he making the 5% to 10% on the floorless as interest. >> You imagine the buyer of the floorless shorting the stock at $10. He shorts 1 MM shares. This creates proceeds of $10 MM. So you assume that he can short the 1 MM shares -- "soak[ing] the buying power from that market" -- without driving the stock price down a penny. Not likely! But look what happens next: << His shorting causes the stock to go to let say, $7.5/share. >> Whoah! The stock stays stable at $10 while the owner of the floorless sells 1 MM shares, then as soon as the selling stops, the stock gaps down to $7.5! Surely you can't be serious? Why does the stock gap down? Can't be weakness in the stock because look what happens next: << Well, at this price (without discounts) the floorless is convertible to 1.333 MM shares, so he shorts another 333,000 shares and get credited about $2.5 MM. >> So suddenly the price stabilizes, and the owner of the floorless sells 333 M shares at $7.5, again without moving the price. What a stock! The last time I sold 333 M shares, it impacted the price a bit. :) << That puts additional pressure on the stock bringing it to $5/share >> Yikes! Another gap down, again miraculously coming just after the selling stops. Well, no need to keep beating this dead horse. You get the point. Actually, you probably don't but perhaps the other readers do. To say it plainly: the only way your hypothetical short-seller makes money is by (a) selling without depressing the market, then (b) enjoying a miraculous decline in prices just after the selling stops. Now don't try to tell me that the price decline isn't miraculous, that it occurs because the short seller has "soaked up buying power." If that were true, then ANY SHORT SELLER COULD MAKE MONEY, floorless or not. He'd just sell at 10, without moving the market; enjoy a price decline to 7.5; then buy at 7.5, again without moving the market. Obviously you've never tried it or you'd know it ain't that simple. By the way, it doesn't matter if you change the example to divide the price changes into tiny little pieces -- eighths and sixteenths. Same argument applies. Joe

To: Zeev Hed who wrote (3)	8/7/1999 10:43:00 PM
From: ISOMAN	Read Replies (1) \| Respond to of 1438

home.att.net

To: Zeev Hed who wrote (3)	12/2/2000 7:12:24 PM
From: ISOMAN	Read Replies (1) \| Respond to of 1438

Well here is one for the books. NRPI National Residential propertice inc (formerly National Rehab properties inc) Once upon a time touted by Mark Schultz... Ok. Board of Directors consist of three people Richard Astrom, his son Chris Astrom, and a new guy named Braulio Gutierrez (who joined after he merged 80% of his encore builders which I have never found anything they built or any assets) Now... When they (nrpi) merged with encore, they (nrpi) assumed a $1 million debenture that Encore had. Long story short, they issued a press release sayig they estimated it would take 6 million shares to get rid of the Debenture. then they subsequently issued them 28 million shares in June (they even issued a press release saying that the volume for june was incredible, and that the O/S as of a certain date was 30 million (even though it was a date several days weeks before the press release) knowing full well that the O/s was about to jump to 50 million and that the common shares being issued were being dumped by the debenture people... Ok. also at that same time Richard astrom was loaned $302,000 at 8% from NRPI (Keep in mind he and his sone control the company. The shareholders get no say) Later, he converted the $302,000 loan into a management fee... So... Now we move into September. Richard Astrom and His son Chris form a new Nevada Corp called "2217 Acquisition inc." Suprise.. In Novemeber NRPI and "2217 Acquisition inc" agree to merge and 2217 Acquisition is granted a convertable debenture for 1 million Dollars earning 8% interest maturing in 2002. Ok... So..the deal struck is that $300,000 is given up front, and the remainder to be paid later (less interest and financing fee which brings proceeds down to $795,000 meaning 2217 still has to give another 495,000) What a sweet deal for Astrom, EH... Of course, Astrom neglected to state what the conversion formula is in the 8K this is the 8k: freeedgar.com Even if I am to assume that the conversion formula isn't floorless... At the current 2 cents...well... Oh and just for kicks they bumped the authorized up to 250 million shares... Even though they juest recently raised it to 100 million from 40 million.. Final thought...They (NRPI) did a reverse split in Jan 1999 leaving only 1.6 million o/s.. Oh one other thing they did... Rather than file their SEC filings last February to remain listed on the OTC, they instead merged with an Aaron TSAI blank Cheque shell company giving him 1 million shares..(Aaron paid some $90 (yes ninety) to form that corp And of course the NRPI longs on RAGING BULL think I am a basher and that NRPI is wonderful.... ANy thoughts?

To: Zeev Hed who wrote (3)	12/14/2002 11:34:51 AM
From: Haim R. Branisteanu	Read Replies (1) \| Respond to of 1438

Zeev, would add my 2 cents - when you sell short shares you borrow them and in fact you are lowering the float that is why short squeezes can be so powerful on top of the covering action. The only rational approach to this trading strategy is that you earn interest on a theoretical 0% down payment. Due to the regulation as a retail investors you must deposit at least 50% of your original investment. Further most WS bandits do not pay you interest on the proceeds of your shorts, so you are at a loss. The technic is true for institutional investors and there are few hedge funds specializing exactly in this strategy. The other issue you do not address is transaction cost for getting in and out which may cost you close to 5% as a retail investors. The only time that such a strategy can succeed is when the borrowed shares to sell short are not "actual" shares or the company itself is a profitless company which is a basic short any way. Amazon had a similar debenture and it worked at very high prices - (it did had a floor but still some made tons of money) but also those that shorted the stock at the right price made money Therefore the theory may work but practically is not -- keep in mind the simple rule THERE IS NO FREE LUNCH