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Technology Stocks : p-com (pcms) -- Ignore unavailable to you. Want to Upgrade?

To: NicholasC who wrote (878)	12/30/1998 1:46:00 AM
From: Bernard Levy	Read Replies (2) \| Respond to of 1461

Nicholas: The main point of floorless convertibles is that the convertible holders wind up buying the company at pennies on the dollar. I would be surprised if at conversion time PCMS is valued by the market at more than say $30M, so that the convertible holders will have bought half of P-Com for $15M. After conversion I expect the share price to recover, and the company to be sold at say 0.8 times sales (about $120M). So the convert holders could quadruple their money if they play their cards right. The returns are much larger than for simple shorting. For test studies, look at CVUS, GOTK, and some others that Zeev has followed in the past. I think Zeev was specific enough-- calling the convertible holders bandits certainly does not make them sound like coupon clippers. Best regards, Bernard Levy

To: NicholasC who wrote (878)	12/30/1998 10:21:00 AM
From: Steven Bowen	Read Replies (1) \| Respond to of 1461

"Why not drive the stock down before hand and then just buy that many shares at the lower price with the money that you didn't lend them in the first place?!?" I don't understand what you're getting at here. How are you driving it down? By shorting? If so, that ties up your cash and buying power, so that when you get the price down, you don't have your original cash to buy the cheap shares. Also, any buying of the cheap shares will drive the price right back up. If you spend $10M shorting it down, and then start buying your position (of course you have to cover first), by the time you've rebought $10M worth, the price will have recovered back to where it was, and you will end up in a net zero position, no gain, no loss, and no position. The idea with convertibles is that once you've shorted it to near zero, a ton of shares will just be handed to you for nothing. You don't have to do any buying which will push the price up. Of course, once you've converted, you can buy back your shorts, which will then drive the price of all your converted shares up. Your short position ends up a net zero position, but now you own half the company, and at a higher price. This is how I've always figured a floorless convertible would work. Hopefully someone will correct me if I'm wrong. Steve