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To: Strategy who wrote (3152)	8/2/1998 3:24:00 PM
From: trust200	Read Replies (1) \| Respond to of 10081

Strategy, I also spent some time on the series C and like you, am not sure that I understood this completely. The series C don't seem so negative to me however. It is true that the investors in series C have the luxury of being able to choose between a fixed conversion price and a conversion that is a function of the market price. They can choose the lower of 19.95 and 135% of the market price at the time of conversion. 19.95 was 135% of GMGC's market price at the time of the transaction. So the investors picked a very bad day. Unusual for such supposedly smart money hedge funds. It is important to see that the earliest conversion is after 5 months from the transaction date. That is somewhere in November. Shorting now would be lethal for the Series C investors . The actual conversion price could be much higher then the price they shorted at. The dilution effect is big but not enormous. I calculated that the total dilution of series a, b and c is approximately 10 million shares in total. Series C alone is approximately 3 million shares. To put that into perspective, unexercised employee share options are running at 5 million as far as I know. So the employees who do the work have stock options for 5 million shares and the guys who provided the key financing for portico get 3 million shares. That balance between the two groups is OK for me.

To: Strategy who wrote (3152)	8/3/1998 11:34:00 AM
From: Rubber Man	Respond to of 10081

When I got in a while ago that was exactly my concern.. my previous posting on this board was exactly what you just said. However, I thought the drop as we see now would take place around January/February. I thought the stock price would've rose (and the convertible shareholders get better prices for shorting) before falling. Obviously I was wrong. Nevertheless, I didn't buy on margin and GMGC isn't a significant part of my portfolio. If anything I might start shorting now to make up for the loss I took (bought >10). Who knows? I expected 6 today, I got it. In general, the market isn't doing very well. Nasdaq is done nearly 4% from its high, DJIA is nearly 5.5% off its high. To extrapolate from that, volatile stocks should be doing worse.