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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Peter V who wrote (13524)	9/6/1998 3:48:00 PM
From: RockyBalboa	Respond to of 18691

OCOM Definitely a convertible without any floor. All warnings made in that S-3 point to the floorless nature of that contract. What I guess about are the plays with numbers in the S-3s. Here, there are 209091 Preferred issued with a price of 5.50 (Maybe, OCOM has been there early August). The number of preferred shares and their respective price do not change anything in terms of the nature of the contract. What generally counts is the amount of the conv (here 1.15 Mill, including the warrants) and the fact that there is no floor. ALso the embedded cap at $10.87 and the incentive warrant at $6 usually appear worthless. If the price of the common is 5.5 the conversion yields 209k shares, At $2.75 there are 418k new shares, At $1 there are some 1.1M new shares out of conversion. However, at present prices only around 300k shares will be added to the 3.7M free float. What is missing: I miss the discount to the market price. Usually in S-3s in the "Conversion" paragraphs, a more or less hefty discount is built in, ranging from 70%-90% from what I know. This convertible makes use of the nasty look-back feature to take the lowest average closing price (ie an average of 3 closings within a time period), regardless at what price the underlying and to-be registered common stocks are actually sold off. If you know the market for microcaps you might estimate the effect on price if you pour a 100k block into the market in quiet times. You can guess where the MMs will place there bids, when they realize that there is something to be dumped on the spot. I hope this helps. Additional reading about "conversion" can be found in several S-3s and 10-k s of companies mentioned in picks like CD-Radio (CDRD), KKRO, ABTE, WAVO, ZITL,ITEX, INCL, GMGC and many others. Best seen with any free-edgar. Look out for "conversion" and "conversion price". Christian