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

To: kolo55 who wrote (9648)	3/21/1999 5:16:00 PM
From: Dennis V.	Read Replies (1) \| Respond to of 27311

Hi all, it looks like CC's beneficial ownership is capped at 4.9% of outstanding common irrespective of the class, preferred, common, warrant, held at any given time. This definition is based on SEC rules, and includes voting rights. They(CC) have voting rights equivalent to 1.3MM shares at the present time. Implied is that the effective beneficial ownership is not entirely dependent on SEC, but is codependent on the terms of the contract. Preferred, etc. are beneficially owned to the extent that 4.9% is not exceeded. So, it is very possible that CC has not converted at this time, giving the nod to Paul's analysis. I haven't found footnote 3, until I do, I think it is still possible that the mix of beneficially owned shares could include some common bought in the open, but I kind of doubt it would be much, if any. It is still possible that CC has shorted. The amount would have to be reflected somewhere in the beneficially owned total, I suspect. My two cents.

To: kolo55 who wrote (9648)	3/21/1999 5:54:00 PM
From: Pallisard	Respond to of 27311

Thank you Paul, the discussion has been illuminating to say the least. It certainly gives me a better concept of this aspect of Valence's financial position. The bonus is that, apparently, it's a bullish indication.

To: kolo55 who wrote (9648)	3/21/1999 6:14:00 PM
From: Larry Brubaker	Respond to of 27311

Paul, you apparently have a few misconceptions about what I think Castle Creek's motivations are and I think they are doing. You seem to think it is a question of either Castle Creek "locking in" all of its profits by shorting against its entire compliment of preferred shares, or they are completely bullish on VLNC, with nothing in between. Looking at the outstanding short position, I doubt whether Castle Creek has shorted more than 500,000 shares. This is the increase in the short position since November. The price has only been above their fixed conversion price of $6 since November. But I never said they "locked in" profits by shorting against their entire complement of preferred shares. My guess is their short position increases when the price is higher, and decreases when the price is lower. Therefore, they can "lock in" smaller profits more than once. They can do this with no risk because they have shares to cover if necessary. By doing this, they can "lock in" small gains several times, with no risk. In the meantime, they haven't hedged against their entire complement of preferred shares. This keeps their options available to either short if the price goes higher (and they don't think it will continue to go higher), short if they think the price is going lower, or hold if they think the price is going higher. You seem to think the lack of conversion of the preferred shares is evidence that Castle Creek's "bets" are placed on the long side. I disagree. My feeling is they will hold off from converting the preferred until there is some reason for them to convert. They earn interest on the preferred shares, they don't have to report hedging transactions against the preferred shares, and the preferred shares are their "insurance policy" for their hedging transactions. I don't think your conclusion that Castle Creek is "bullish on VLNC" can be reached from the information we have. Because we don't have an accounting of their hedging transactions, we cannot estimate the level of their relative bullishness or bearishness on VLNC. We can only guess. But if they were as bullish as you suggest, they would simply eliminate the variable-rate conversion provisions on their securities entirely. This would remove a strong cloud of uncertainty on the stock and increase investor confidence, which should increase the share price. Then there would be no doubt their interests are completely aligned with the holders of the common stock.

To: kolo55 who wrote (9648)	3/21/1999 6:15:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 27311

Paul, your theory, as such, is sound, but if indeed, CC is an agent of mercy, why have the floorless hanging like a Damocles sword over this company? Many investors are surely staying away fromVLNC because of the presence if this instruments. They be right or wrong, but there are so many corporate carcasses around due to such floorless instruments that you should not be surprised if prospective investors shy away when they see this as part of the financing structure. Zeev