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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: oexwa who wrote (17737)	3/18/1999 8:32:00 AM
From: Zeev Hed	Respond to of 18691

Bob, ALYD recently did an acquisition, you may want to learn more about the acquired company, maybe this acquisition lessens ALYD dependence on Y2K problems and put them in position to participate in software services that will be required in managing large data bases and internet commerce of their current client base. As for the floorless, it is indeed a three tranches floorless ($3, $2 and $5 MM). I believe the "ceiling" is at around $12/share, which will add less than a million shares to the current 17 MM shares, not too bad. However, at the current price (around $6/share) the conversion could add close to 2 MM shares (and that is over a relatively long period, I believe something like 9 months, but you'll have to recheck the K-8 or the S-3 when it comes out). Of course, if their business does not pick up (and it did falter in the last quarter badly) as their forward statement indicated (they believe that this quarter they will reach $7 MM in sales? that will be barely profitable, IMHO), then a death spiral could ensue. The last 10Q does not indicate a company "in distress", but the fact that they could not obtain financing without the floorless feature indicates to me that the lenders did not think the future looks too bright. If you are short, you are probably safe, but watch try and analyze the potential impact (both negative and positive) of their recent acquisition for a possible turnaround. Since I believe the market will stink badly over the next two months, you might have a good opportunity to cover under $5. The 8-K has some of the standard limitation on conversion (20% of outstanding shares and the conversion should not result in the lender having more than 4.9% of the outstanding shares), but a staggered conversion can partially take care of that and of course the company might be obligated to go to the shareholders for an authorization to remove this feature. I think that the most important thing is to determine if they have any future prospects without the Y2K, this business is dead as far as the stock is concerned, since people are already looking at what the revenue stream will be post January of 2000. Zeev