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

To: Ellen who wrote (278)	4/25/1999 2:53:00 PM
From: Razorbak	Read Replies (1) \| Respond to of 752

Ellen, those are very good questions. I'm not sure I know the answers to them, but I know a couple of people who do. Perhaps you should check on the following thread for more specific information? #Subject-26686 ;^)

To: Ellen who wrote (278)	4/25/1999 6:06:00 PM
From: Henry Volquardsen	Read Replies (1) \| Respond to of 752

Ok Ellen, let me try and post this again <g> Warrants are just long term call options. Whether they are 'sweetners' or anti-dilutive or something else specificly depends on the terms of the issue. If there are no conditions, i.e. it is a fixed price for a specified time, then it is just a 'sweetner'. However if there are conditions that modify the warrant then you are looking at something else. An example of an anti-dilutive warrant would be one that is only issued if there is a subsequent event that would dilute the current holders. A hypothetical would be a company that issues a convertible for 1,000,000 shares that when exercised would bring total shares to 10,000,000. The convertible owners would then have a fully diluted interest in 10% of the company. The warrant could be written in such a way that the convertible holders would maintain their 10% ownership. So if the company were to issue 2,000,000 new shares the convertible holders would get sufficient warrants so that when exercised they would be able to maintain their 10% interest. The method of establishing the strike price of the warrants will be outlined in the prospectus in advance and will most likely be attractive to the convertible holders. There are lots of different ways the warrants can be structured. Warrants are always a smart provision for holders of the convertible, there is no cost if not exercised so no real downside. The only way to tell is to read each prospectus carefully. You can usually get the prospectus from Edgaronline. It would be possible for a form of anti-dilutive warrants to be attached to 'floorless' convertibles. In fact it would make them even more dangerous. I'm not really up on the differences in reporting requirements for Nasdaq small cap and OTC:BB. If no one else comes upp with an answer you might try www.nasd.com . The comment about whether the fund is permitted to sell the common shares short is an issue of what the fund itself is permitted to do. All funds need to have a prospectus or offering memorandum that specificly outlines what they can do. If not approved it cannot be done. However most funds will give themselves the ability to sell short. The way to find out is to get a fund prospectus. For mutual funds this is easy. For private funds it will be tougher to get a prospectus. But the ability to sell short will need to be clearly stated. As far as what stops a fund that is not permitted from shorting getting someone else to do it on their behalf. The Law. These wash transactions and people do get put in jail for it. I believe some of the key charges against Drexel Burnham were related to this type of activity. It is very difficult to find out that someone is doing this and prove it. But if they are they should be reported to the SEC immediately. I hope this helps answer some of your questions. Let me know if there is anything else I can help with. Regards Henry