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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Ocote who wrote (2197)	4/15/1999 3:15:00 PM
From: Q.	Read Replies (1) \| Respond to of 2506

OCOM: reverse split tomorrow OCOM is a genuinely broken stock. Previous history of toxic convertibles, but none in play now. The co. is out of cash. Stock at 25/32. Market cap is $4.8 M. Tomorrow a.m. a reverse split will take effect, 1:7, corresponding to a post-split 5 1/2, so the stock may very well open above 5. quote.yahoo.com The reason for the split is that they found somebody to do a secondary offering, and the primary thing that the underwriter (Southeast Research Partners) wants is a stock price around 7. Best case scenario: the secondary comes off and they stay in business, with a massively increased float. Worst case: the secondary fails and the co. goes broke very soon. I asked the co. what factors could cause the investment banker to back out of the placement, and I was told the main thing is whether the stock falls far below their $7 target. It already is down to 5 1/2 post split, and if the stock tanks badly after the reverse split, which often happens, then they are toast. Southeast Research Partners is a low-quality investment banker. As an example, one of their analysts, Hank Powell, has had a buy on PNDA for a couple of years, and that stock is now delisted and below $1. See it here: crn.com BTW, the co. issued a news release announcing the split would be effective April 14. I called IR today, and was told that it will actually happen tomorrow morning.