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Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: TH who wrote (436)	6/5/1999 9:38:00 AM
From: Zeev Hed	Respond to of 1438

Thurston, sometimes they do not even convert, you can find out if conversion has occurred or not by looking at the share count in their quarterly reports as well as the left over size of the preferred. If the preferred has not decreased, it would means that the floorless holder simply engaged in hedged shorting. Take ASMF it self. Few months back it had a spike to $5. The bandits being close to the company have a good chance of finding first the "material" event or news release that caused this spike (they may even "engineer it themselves). Before the spike they stand flat. Then they short the spike itself, they can short with impunity since most of these floorless have a ceiling (you'll have to go back to the document describing the floorless, it will have a sentence including "conversion at the lower of: ... including a price which will be a discount to the price on closing, and then the price at a discount to the last 5 days lowest bid or whatever the language). If $5 was above the ceiling, they short and do nothing, they get back their money plus profits if the price is well above the ceiling, and continue getting interest (having now no money at risk). Then, when their shorting brings the price down, they can cover (and the period of decline may be so short, that it will not appear in any report, since the short is reported only for the 15th of the month (or a day close to it if that was not a trading day). If the price starts and decline under the ceiling, they can then engage in further shorting, because the face value of their floorless allows a greater number of shares to be shorted. Mind, you they already have been paid back all their investment by shorting at $5) From time to time, they may cover totally or partially their position, to engage later in another shorting session. They know much better than you and I where the stock might go and they know where it was in the last five days, in case of a sudden run, they can always use the price before the run (the last five days, which is of course lower) to actually convert and deliver stock from the conversion. You look at the trend of this stock, and you will see it is going down, and to me it seems at the beginning of a death spiral. From time to time you see spike back up, these could very well be generated by short covering, which creates "momentum" into which the bandits can short again at higher prices. Zeev Thurston, in the second or third post on this thread is a lengthy description of the typical floorless scenario.

To: TH who wrote (436)	6/5/1999 12:18:00 PM
From: Bruce A. Thompson	Respond to of 1438

Thurston< Explanation by Zeev Hed: Message 5368910 What's A Million Dollars Between Friends? Message 7022370 Message 7022432 Message 7022489 Message 7022543 Message 7022596 Message 7022764 Message 7022728

To: TH who wrote (436)	6/5/1999 4:03:00 PM
From: RockyBalboa	Respond to of 1438

Finally, as some others posted the objective of the funds are to get investments with annualized returns of north of 20% - regardless of the stock price. There are some rare blackouts (ie company dies, convertible holders get whats left from company....) or even litigations when companies refuse to issue shares to the convertible holders. Shit happens, and thats what we call "credit risk" as the transactions are financing transactions from their original meaning, not investment activities. But note, with a construction having a cushion to the north (note that there are warrants issued in connection with the debenture), and a vehicle which turns into stock at a price you self determine, also with a cap/ceiling, how are the odds to lose? Nil, IMO (except other risks...) The nasdaq made the futile effort to regulate the convertibles but made life more difficult. Smaller transactions, and established floor prices (in new issues) lead to even more dilutive or impairing constructions because.... the market (for convertibles) demands yield, nothing else.