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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (1617)	8/6/1998 5:26:00 PM
From: gaohong	Respond to of 2506

DRTK convertible deal and why it's good short. DRTK rising from low 6 1/4 to 8 7/8 after warning in two days. earned -0.06 vs exp. 0.11. Today's rising is around 2pm when 2M share buyback news was released. Obviously news leaked. In less than 10min, 50K shares bought. block shares are 1x15K, 1x5K, 1x4K, the others are 1000 shares. price reach 9, then pushed back, then rise again to 8 7/8. Read 10K about convertibles. Basically there are two: 1. $10M convertibles debenture, convertible to 1.382M COM shares So conversion price is 7.23$. So this is no selling pressure on stock, except accure interest. 2. $16M convertible %8 160K preferred shares. Convertible at 3$ that's roughly 5.3M extra shares, and quick profits. 3. Options for 1.25M shares at 3.75$ as mentioned in today's news. Option holders want cashing in. 1.25M share along will take DRTK down to 5$. But company offered some support by buying 2M shares. So buyback will be 1.25M for option holders shares and rest of 0.75M will for some large and private holders, the left may be used to support open market 0.25 or 0.5M maybe. The following is copied from 10K on convertibles As part of the strategic alliance, BNFL invested $10.0 million in the Company in the form of a convertible debenture. The debenture accrues non-cash interest during the first five years at the one-year London Interbank Offered Rate (LIBOR) and is convertible at the option of BNFL into 1,381,575 shares of the Common Stock prior to November 7, 2000. BNFL also agreed to provide the Company with research and development funding of at least $500,000 per year over five years. The two parties will mutually agree on how the research and development funding will be spent, but the Company will retain the rights to the vitrification processes that it develops through this funding. The Company has agreed as part of the strategic alliance to sublicense its radioactive waste vitrification technologies to BNFL for use only in the United Kingdom. 14) 8% Cumulative Convertible Redeemable Preferred Stock In January 1995, the Company issued for $16 million, 160,000 shares of 8% Cumulative Convertible Redeemable Preferred Stock, par value $.01 per share (the "Convertible Preferred Stock") and an option (the "Carlyle Option") to purchase up to an additional 1.25 million shares of the Company's common stock, at any time prior to January 24, 1999 for $3.75 per share to investment partnerships sponsored and controlled by The Carlyle Group ("Carlyle"). The Convertible Preferred Stock is initially convertible into the Company's common stock at a conversion price of $3 per share and, if not previously converted, the Company is required to redeem the outstanding Convertible Preferred Stock on January 24, 2002 for $100 per share plus accrued and unpaid dividends. The Company is required to pay quarterly dividends on the Convertible Preferred Stock of $320,000. The proceeds, net of offering expenses of $1,309,974, from the issuance of the Convertible Preferred Stock and Carlyle Option were $14,690,026, of which $14,410,026 was allocated to the Convertible Preferred Stock and $280,000 was allocated to the fair value of the Carlyle Option. The difference between the carrying value of the Convertible Preferred Stock and the redemption value is being accreted through charges to stockholders' equity over a six-year period to January 24, 2002. The estimated fair value of the Convertible Preferred Stock at December 31, 1997 was approximately $40 million.