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Technology Stocks : The New QLogic (ANCR) -- Ignore unavailable to you. Want to Upgrade?

To: Ken Richard who wrote (18424)	10/8/1998 10:23:00 PM
From: Greg Hull	Read Replies (2) \| Respond to of 29386

Ken, I am clueless when it comes to typical methods of preferred convertible shareholders. The best I can do is pretend I was one and try to figure out how I could benefit from having a few of those shares. How those who have been around the block a few times (and perhaps have more killer instincts than I) operate is a mystery. There are several aspects of our situation that I don't understand. There are five preferred shareholders who can each own about 700K shares of common stock (the 5% limit). George reports that the current short position (from mid-September) is 1.7M shares, well less than the 3.5M shares they can own in aggregate. Perhaps not all of them are shorting, or perhaps they own well less than the 5% limit. They certainly did not short against the box to lock in high prices, since they haven't been high in quite a while. If they intend to drive the company into bankruptcy, it is foolish for them to hang on to common shares, but I don't think there is any way for us to know the long position of the preferred shareholders, is there? I, too, do not understand how a death spiral results in bankruptcy. Perhaps the final stages are not possible unless buyers are absent, that is, there are no earnings to attract buyers. Convertible preferred offerings are called junk equities by some because blue chip companies have other choices to raise capital. Only the cash starved companies with no other recourse turn to them. We are all betting that Ancor is not a typical death spiral company. As to whether shorts have to be covered, I think the answer is yes unless the company goes bankrupt. If they cover with recently converted shares, I don't see how the covering could raise the bid. Since it increases the dilution, it seems that it could reduce the bid. This assumes that somebody knows when the shares outstanding increase. We hear about it approximately once a quarter. I don't know if it is possible to find out more frequently. This is one expense way to learn about high finance. Greg