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Strategies & Market Trends : Due Diligence - How to Investigate a Stock -- Ignore unavailable to you. Want to Upgrade?

To: Mary Baker who wrote (238)	4/25/1999 12:05:00 AM
From: Phil(bullrider)	Read Replies (1) \| Respond to of 752

Mary, It appears you have already arrived at your decision concerning RRRR. #reply-9088942 Have fun, Phil

To: Mary Baker who wrote (238)	4/25/1999 12:39:00 AM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 752

Mary, It depends on the nature of the convertible. Most convertibles are straight forward. They have a fixed conversion and no real problem. However there is a species of convertible that has variable conversion pricing. You see this done with very risky credits. The investment banker will demand downside protection in the form of a conversion price that is adjusted downwards if the price declines. The negative of this type of financing is that, at least theoretically, it allows for stock manipulation. The way it works is someone buys up the issue and then shorts the stock. If the stock goes up no problem, he just exercises the convert. But if he can get the stock going south he can lower his conversion price and get more stock. This encourages him to short even more than the size of the issue and can almost become self fulfilling. These deals are potentially very damaging to the shareholders as not only is there a large price decline but there is massive dilution at very low prices. I have never been in a stock where this has happened but that is the theory as I understand it. I don't know what type of convert RRRR has. There are two threads on this type of financing. I don't post on these threads so I don't know what the quality of the info is like. Subject 22494 Subject 19082 If you can link in a post in which someone mentions points 2 and 3 I'll try and take a look at what they are referencing. An Auditor using a phrase like If RRRR can remain an ongoing concern sounds a bit severe. Accountants usually use very cautionary language but that seems a bit ominous. Do you have a bit more of the paragraph it appeared in so we can get a bit of context. Henry

To: Mary Baker who wrote (238)	4/25/1999 3:13:00 AM
From: EL KABONG!!!	Read Replies (1) \| Respond to of 752

Mary, I took a real quick gander over at RRRR. Here's the results of a 15 minute look. Take it for what it's worth... If you bought in at $5 a share, you have a little over a three-bagger right now. I don't know who said it first but "I've never met anyone who lost money taking a profit". Convertible Debentures: I looked very quickly at this. They appear to me to be of the floorless variety, or what some call a death spiral. Debentures are not a good sign. They go hand-in-hand with companies that are in deep financial doo-doo. Sometimes the holder of the debentures will short against the restricted holdings, the resultant dilution making the short a self-fulfilling prophecy. The fact that the "debt" is used to make an acquisition is even more alarming (to me as an investor). And usually the debentures are written in such a way that the debenture holder has a position in the liquidation queue that puts them ahead of common shareholders should financial disaster occur. "Strike one!" yelled the umpire. A "Letter of Intent" is just that: intentions, not commitments. Generally speaking, some terms will be spelled out in the LOI. Again generally speaking, the people issuing the LOI have likely left themselves with many back doors out of any agreements should future circumstances favor their non-participation. As far as the terms not being disclosed, it's not all that unusual. And taken as a solitary factor it's not a primary worry, but should be of concern to investors looking at the total risk picture. "Ball one." said the umpire. NASDAQ listing requirements are relatively straightforward. Either RRRR does or does not have the necessary assets to maintain their listing. At first blush, it would appear to me as though the concerns may be valid here. "Steeeerike two!" bawled the umpire. The auditors' report is the information that would tip the scale for me. Auditors do not use the phrase "These factors raise substantial doubt about its ability to continue as a going concern." lightly. In fact, this particular phrase is usually remarkably prescient. "Strike three!!!" cried the umpire. Mighty Casey has struck out... KJC

To: Mary Baker who wrote (238)	4/25/1999 9:29:00 AM
From: Don Pueblo	Read Replies (2) \| Respond to of 752

RRRR has a floorless convertible. In my opinion, the stock has run hard at least in part on a short squeeze. I myself would not touch it. You need to understand what a floorless convertible instrument is. There are two threads on SI that discuss them. Here is what can happen in real life. ljx.com

To: Mary Baker who wrote (238)	4/25/1999 10:54:00 AM
From: who cares?	Read Replies (3) \| Respond to of 752

Mary, I don't know about RRRR from $5 to $10 but from $10 on up it's all been the travelling horde of gypsy daytraders that move from "story" stock to "story" stock running them up them bailing out and going to the next big thing. If you want to continue to make money in RRRR sell into any spike and then make it on the short side. When you see the term "floorless convertible" start popping up in a stock you are long, the best course of action is to(Monty Python voice) RUN AWAY, RUN AWAY!!! Take a look at what happened on IMON back in January. On the first run if you had checked the float on Yahoo it was like 3 or 5 million I can't remember. The stock does huge volume and moves but not like it should for the volume/float. It then proceeds to crash back to earth. The next week if you had checked the float on YHOO it was north of 10 million, the work of the floorless. Still, so many people were massively short the stock that the powers that be got another run out of it by squeezing them, those that held on, or added to their shorts and had patience again cleaned up as it imploded. RRRR will likely do the same. For a good example of how floorless spell doom for a company like this check out this post Message 5368910 Zeev's example may be a little extreme, then again maybe not. Agreeing to a floorless is a move of either an extremely desperate company or an extremely crooked one. CMB