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

To: Zeev Hed who wrote (78)	10/4/1998 7:02:00 PM
From: George Dawson	Read Replies (1) \| Respond to of 1438

Zeev, I have read though all of your posts, in fact all of the posts on this thread. I find myself in the unenviable position of being long in a stock with a floorless convertible. I won't bore you with the details (we have 69 posts on this topic alone on the Ancor thread). I was wondering if you or Barb could comment on the best way to weather this and if stocks recover after the conversion. The problem of course is that many of us were blindsided by the mechanics of this procedure. As a result, we are holding stock worth a fraction of what we paid for it and will really take a pounding if we sell it. My attitude is to just hold on and see what happens when the convertible unwinds. Finally, the most confusing aspect of this procedure is the apparent way the preferred owners short shares at unmarginable levels. The only way it seems to make sense to me is in the following scenarios: 1. You are a preferred holder and short before the lower conversion price. You cover these shorts with the lower priced converted shares or at that point lower priced shares you buy at market price and cover the difference. 2. You short against the box, lock in a specific profit and have to unwind both the long and short position. Two final questions: 1. Aren't there SEC rules on the total number of shares available for shorting (UPC-71)? 2. Is there any kind of buying pressure possible to move the stock in a trend favorable to longs? I would think it would be theoretically possible. If you assume that 10% of the float is short and represents the preferred owners shorting against the box - there should be a point where the stock can advance - even if the short position doesn't need to cover. Let me know where I am wrong. George D.