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

To: Roger A. Babb who wrote (247)	1/31/1999 5:18:00 PM
From: Dale Baker	Respond to of 1438

I'm looking for opinions on PRVT which will start trading on the NASDAQ on February 1. Specifically, they have a Series A Convertible Preferred which could double the shares outstanding. The shares are convertible one-for-one unless the stock drops under $4, from what I can tell: sec.gov. I expect PRVT to attract a lot of attention as a pure adult entertainment play with a small float (for now). But I'm not sure which way this financing deal will take them.

To: Roger A. Babb who wrote (247)	2/1/1999 8:53:00 AM
From: Crossy	Respond to of 1438

Roger, thanks a lot. Of course, IMON qualifies for this subject, bcause of their Series B/C convertible preferred. Citing from SEC-Edgar, last 10-Q submitted Nov. 98 on this matter: (IMON Preferred B/C) .... During the second quarter of 1998, the Company began working with a business and financial consultant to assist the Company in completing a private placement and engaged the consultant to refer potential investors to the Company. The Company has received $1,639,750 (net of offering costs) from the accredited investors introduced to the Company by the consultant, for the purchase of 1,030 shares of Series B and 1,050 shares of Series C Convertible Preferred Stock, par value $.01 ("Series B/C") at a price of $1,000 per share. The Series B/C stock is convertible at the option of the holder at any time after 90 days from the closing date, into a number of shares of common stock equal to $1,000 divided by the lower of 65% of the average market price of the common stock for the five trading days immediately prior to the conversion date, or the market price on the day of first closing. ..... Now one must bear in mind that IMON has risen to a high above $10 in the net-frenzy. Judging from afar I'd say that it pays for the holders of the floorless preferred that the stock rises in the beginning. They could lock in higher in this way, I think - and due to the floorless - they can always deliver once they placed their hedge. Even "better" is the fact that there's also a ceiling on the conversion "market price on the day of first closing" - I guess that's when they issued the preferred. Hmm.. I'd say this severely limits ANY UPSIDE POTENTIAL. I was so shocked by this that I informed a friend of mine who was into IMON - that he got out near $8. Funnily he made a handsome profit. Actually this should be a good short now. OTOH, there'S this internet aura around this stock. I won't short this one but just stay away.. best regards CROSSY BTW: If you look for a simpler floorless without net-nut connection there's AURL. The preferred they issued this summer is floorless - I guess this is "Series B". Only caveat here is that conversion is "spread" around months, with maximum convertable portions of the preferred assigned to each month. As I see it this still allows hedging and the floorless death spiral. Just the spiral will be a little streched. I like their products (Aureal Vortex) but this floorless will hang over the head of the company til April 99 and recently they just asked to increase authorized stocks to 200 million from 100million. Hmmm...