Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: kolo55 who wrote (9616)	3/20/1999 8:29:00 PM
From: Larry Brubaker	Read Replies (1) \| Respond to of 27311

Are you through now, Paul? <<Larry, you've been telling us Castle Creek can't lose, even if Valence collapses. >> Yes Paul. The reason deals like this are made (floorless conversion priveleges) are set up this way is because it is a high risk investment that no institutional investor would touch at a fixed price. <<In summary, you say that Castle Creek did not invest in Valence expecting them to succeed, and they plan to make money whether Valence succeeds or fails.>> That is exactly correct. In fact, I think one would be foolish to assume that Castle Creek would set up the deal this way and not take advantage of the tools (hedging their bets by shorting the stock) provided. <<But now the SEC filings and short interest reports aren't quite matching up with your theory. >> Sure they do. The shares outstanding question has nothing to do with this theory. The short interest reports have indicated a large increase in the short position since Castle Creek got involved. <<Although it is still uncertain whether Castle Creek has shorted shares and if so how many shares they have shorted>> You previously claimed that because there was no change in beneficial ownership statement filed, Castle Creek could not possibly have shorted. You apparently are now acknowledging you are wrong on that issue. <<I believe that Castle Creek has shorted less than 300,000 shares as a hedge, if any, and thus the bulk of the $15M they have invested in Valence is still at risk.>> At least you are acknowledging that your previous claim that they couldn't have possibly shorted was wrong. But what's the basis for your belief they have shorted less than 300,000 shares? Your wishful thinking? The short interest has increased by a lot more than 300,000 shares since Castle Creek became involved. <<We will find out more when the next short interest report is released. If your theory, and Zeev's assertion today that they may already shorted to hedge half the preferred B position, are correct, then the next short interest report should show an increase in open short position of over 600,000 shares>> I have never claimed to know exactly how much of their position is hedged. Nor have I made any prediction as to how much the short interest will increase during any period. I simply point out it has increased substantially since July 27, 1998. <<Your theories are starting to unravel.>> They are? I see nothing in your flurry of posts that provides any evidence to suggest my theory is unraveling. Again, Castle Creek would be foolish not to use the tools (hedging their position) that the terms of the financing allow.

To: kolo55 who wrote (9616)	3/20/1999 9:10:00 PM
From: Larry Brubaker	Respond to of 27311

One more addition. <<Over the last 5-6 months, you've constructed an elaborate conspiracy theory where CC had converted some preferred shares, and has shorted enough shares to hedge their remaining Series A preferred shares.>> First of all, I would not consider this a conspiracy theory. I simply believe that it is in Castle Creek's best interest to put themselves in a position where they can profit no matter what happens to VLNC's stock price. They can put themselves in this position by hedging their bets (shorting against their preferred shares). I have never said that they would have had to convert some of their preferred shares to common to use this strategy. That was your claim. They can convert their preferred shares to common at any time they so desire. In fact, I would argue it is not in Castle Creek's interest to convert the preferred shares because they are earning interest on the preferred. Therefore, while you may be correct that they have not converted any preferred shares to common, that was not and is not relevant to my theory, and so if you are correct that they have not converted any shares, it is irrelvant to the question of whether they have shorted against their preferred stock.

To: kolo55 who wrote (9616)	3/20/1999 9:18:00 PM
From: Larry Brubaker	Respond to of 27311

One more recap. This issue began with the question of whether Castle Creek has hedged their bets by shorting against their preferred shares (and/or warrants). Paul claimed this was impossible because they would have to file a change in ownership statement. I claim this is doubtful since they never filed a beneficial ownership statment to begin with. Paul now apparently acknowleges it is possible that Castle Creek has shorted, but for some reason he believes it is less than 300,000 shares. Paul claimed that the number of shares outstanding already reflects the dilution represented by the conversion of preferred shares to common. I claimed that was impossible because the share count has not increased sufficiently to allow for this. Paul now hypothesizes that the increase in the share count reflects the outstanding warrants, but not the preferred shares. This may be correct, but if so, the 2.5 million shares (minimum) of common stock to be issued upon conversion of the preferred shares is not reflected in the share count. Paul claimed that somehow the Castle Creek "hedging their bets" theory is dependent upon the preferred shares having been converted to common. I disagree and maintain that Castle Creek can and probably has hedged their bets regardless of whether they have converted or not converted any preferred shares.