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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Pronichev who wrote (5483)	11/22/1998 6:05:00 PM
From: Larry Brubaker	Read Replies (2) \| Respond to of 27311

<<don't you ever talk to Carl Berg? He's got 800 million dollars and this company is his baby, and anyone whose got that kind of money wants much more.>> No, I haven't talked to Carl for a while, have you? <VBG> I'd feel much better (and wouldn't have sold last week) if the July financing had consisted simply of debt from Carl, rather than debt from Carl plus preferred shares to a hedge fund convertible at a floorless variable rate. Here's an interesting speculation. Assume Carl is one of the investors in the Castle Creek Hedge Fund. (Remember, the agreement between Castle Creek and VLNC requires VLNC to keep the names of the hedge fund investors secret). Also, assume Carl has lots of money invested in VLNC that he sees little chance of getting back. What should he do? First, he participates in the VLNC financing, both as an equity investor (secretly through Castle Creek) and as a creditor (directly through his loan to VLNC). He figures that he'll get his loan back regardless, because creditors are first in line in the event of bankruptcy. As a secret investor in the preferred shares, now he gets himself a shot at getting his equity investment back. If VLNC does not meet its milestones, he participates in the shorting "death spiral" and earns a killing. Meanwhile, he buys a few more shares on the open market giving less knowledgeable investors the confidence to bid the price up, figuring Carl knows what he's doing. All the better to create a higher price to short the stock. And he's got plenty of shares to cover should Lev pull the rabbit out of the hat and get a material contract by 1/27. Am I saying this is what is hapenning here? No, I have no evidence to support this theory. Is it beyond the realm of possibility? No. In fact, Zeev pointed out an example in which the CEO of a company was one of the "bandits" in a death spiral. Plus the short interest has risen substantially. I put forward this speculation simply as a hypothetical situation that could explain why an insider buying would not necessarily mean his interests are aligned with holders of the common stock. Again, I'd feel much better of the situation if Carl had simply put up a loan to VLNC, rather than a loan tied to a private placement of preferred shares to a hedge fund in which the individual participants are kept a secret. Lastly, I know the flames will be coming for this one and thats fine. I'd just point out in advance that I have clearly stated the above is speculation only. Unlike others on this thread who make statements of purported fact, ("VLNC is producing 5-10 batteries per minute from NI" comes to mind) far beyond what the company will announce in public.