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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Q. who wrote (2043)	12/20/1998 1:23:00 PM
From: Dale Baker	Read Replies (1) \| Respond to of 2506

Take a look at VINF and tell me if it is a ripe target. They have reached Series F in their discount convertibles: sec.gov

To: Q. who wrote (2043)	12/20/1998 9:24:00 PM
From: RockyBalboa	Read Replies (1) \| Respond to of 2506

John, thank you for you info here. My take is that BTIM should tank a bit on the rights offering. I feel that it has been taken up in advance to get more money in the companies coffers. I also remember the rights offering on SIEB...the common price fell far under the issue price of the new shares (with the diffence that it was fixed at $7 there). However it is a way to get enough cash to survive the next few quarters without extraordinary dilution, depending how high the then effective BTIM price is. As I read the S-3, the ratio is 20:1 here. It doesn't mean that much... What happens if the rights are not exercised? They are simply cancelled and expire worthless? C.

To: Q. who wrote (2043)	12/22/1998 12:59:00 AM
From: chester lee	Read Replies (2) \| Respond to of 2506

John, <<There are lots of arbitrage schemes to play this.Here's one: buy the stock before the record date and attempt to oversubscribe the rights offering, while shorting an equal number of shares. If you are successful in oversubscribing and the stock price goes down less than the 33% discount on the new shares, then you come out ahead.>> I'm not understanding your arbitrage play. How does one over subscribe?? I would think (theoretically) all the longs would be subscribers, since they would get additional shares as a steep discount. However, the actual and the theoretical are not always the same, and in this case, should be valued at whatever the rights will trade for, which should be the difference between the market price of the common and the newly issued shares (roughly 1/3 of the value of the common). Would it not be safer to just short the common after the rights offering, just to avoid the rights altogether? The premises is that the dilution (albeit it a small 5% of the shares outstanding) will tilt the balance of supply and demand towards supply and force the share prices lower. The story on BTIM is out, and despite Asensio and his reports, BTIM trades where it trades, at some sort of equilibrium between buyers and sellers. <<The rights will trade separately, so there are probably some interesting arb plays there, too.>> How so?? I can see shorting the commons after the rights offering, and buying the rights (assuming the numbers work out), and then exercising the rights and buying the newly issued shares to cover the short position. This plan however, assumes that the efficient market theory does NOT work, and that the price of the commons stays afloat after the rights are dis-associated, and that the rights trade at some sort of discount to the 33% price difference between the original and the newly issued shares. FWIW, I never had a position on BTIM, long or short, and do NOT have a current position at the moment, but am contemplating a short position. Do you have additional arb plays in mind?? I've been gun shy taking on any additional shorts with my recent 100% losses in PVN, ENVY and large paper losses on ENML, FIBR, WEBB, and VTCH. chester