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

To: Zeev Hed who wrote (103)	10/8/1998 10:56:00 PM
From: George Dawson	Read Replies (1) \| Respond to of 1438

Zeev, Almost all of the longs on the thread have been interested in fibre channel and knew the product was good and the company has good engineers. We figured the market would develop (as it has) and that the company would start making money and signing deals (it has). Unfortunately, none of us knew about this mode of financing and how it can destroy the stock price. What is really frustrating is not even having access to the appropriate information on the conversion itself. We don't know how much of the conversion is left and probably won't until we read the SEC reports after the fact. It is impossible to know the implications of the short position, without knowing the amount left to convert. As anyone can tell by reading the posts - we are generally guessing about how the conversion works. At this point the strong case to stay is primarily that I would not be able get sufficient tax loss advantage - I would probably run out of time. I think your thread is good advice to prevent others from finding themselves in the same situation. The Ancor story may be a floorless convertible experiment in progress. George D.

To: Zeev Hed who wrote (103)	10/9/1998 1:01:00 AM
From: Dave K	Read Replies (2) \| Respond to of 1438

Thanks all for sharing invaluable insights. I have a few questions related to these financing deals which I cannot resolve. Can you color this in a little further ?. First Unresolved: What is the management's real "position" when they seek these debt offerings ?. The management should ? be well aware that their company's market value will evaporate, simply by observing the results of many other companies. Specifically, when you see the Chairman/CEO own close to 25% of a company stock and continue to make periodic large open market purchases... at the same time several convertible deals are being inked over the years. I question whether he is really taking a beating with the rest of the float holders or is it possible he is capitalizing on the frenzy. If so how ? Have holders of other Death Spiral Specials observed similar large insider ownership or purchases ? (usually it's one individual, the Chairman/CEO). Second: What is the banker's position when they arrange these deals ? Especially when they are also the market makers. Do these folks consciously retain an inventory of stock knowing it's value will be eventually be reduced to a faction or participate in the rewarding strategies ? This may (or may not) be limited to the lower tier investment bankers. Who really controls the direction of a stock ?. Today I observed the short position on my best Spiral Special (I have several) jumped 300% August/September, just as the due dates of two of the convertibles are due here in October. The third fresh convertible package is still ticking. The stock price has fallen from $6/$7 to 25c in three years since the first deal was cut. This may be one for the textbook. (To be fair, my observations were based on small cap arena). Thanks Dave