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

To: Yamakita who wrote (1670)	8/21/1998 11:33:00 AM
From: Q.	Respond to of 2506

Yamakita, re. TERA: << I'm not really shorting it based on the convertible--that's just one ancillary semi-tasty piece of the entire pie.>> That's quite a reasonable approach, IMHO. <<But isn't $6 milion three months' worth, not five as you wrote? Their burning $6 million per quarter.>> My figure is the 'cash flow from operations' from the latest 10Q. <<I wonder if the S-3 sellers will short it.>> Yes. If you look in the S-3, you will find in the 'plan of distribution' that they are permitted to do so. << Who are Advantage and Genesee? >> They are offshore funds who frequently do these kinds of deals. Genesee was the defendant in a securities investigation (I've forgotten whether it was a trial or just what) about a year ago. The point of that investigation is that they were shorting the stock before the registration was deemed effective, and it was ruled that this constituted selling unregistered stock. <<Do you see the 0.37/share book value as relevant?>> It's small enough to be irrelevant. It poses no significant floor on the stock price. Anybody buying the stock is doing so on speculation of future revenues, not based on viewing the balance sheet form the point of view of a value investor. You are smart to look at this, though, because many low-RS stocks are beaten-down value stocks, and you don't want to short those. << their only market for it the DoD. Severe, and I mean severe, competition from the big Japanese makers (especially Hitachi), and getting more so everyday with the plunge of the yen, which has taken a 50% beating over the past three years.>> All very good risk factors for short sellers: a single product just entering production, dependence on a single (or very few) customers, severe competition with unfavorable forex trends.