Subject: convertibles
From dotOB
PostID 398644 On Monday, April 25, 2005 (EST) at 12:55:00 PM
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Some interesting reading;
The convertible securities that are such a problem for OTCBB companies are often called 'death ride' or 'death spiral' convertibles. Normal convertibles give the holder the right to convert the first security (either a stock or a bond) into another type of security (usually common stock) at a given price (i.e., since the price is fixed, the total number of shares underlying the convertible instrument is a known quantity. Death Ride's, however, are not convertible at a given price per share but instead at the number of shares required to meet the face value of the convertible instrument. For instance, if the convertible is preferred stock worth $1000 and the common stock is worth $1, then the convertible is worth 1000 common shares. However, if the common stock subsequently declines to 50 cents, then the preferred is now convertible into 2000 shares. What some buyers of the death rides do is to play them like they do Reg S shares. They deposit the convertible shares into a brokerage account and then short sell a like amount of the common stock. The short selling activity helps drive the common share price lower, which means the convertible is worth a higher amount of common shares. The additional common share equivalent is then sold short, driving the share price even lower. This almost never-ending cycle is why these instruments are called 'death spirals'. Since the short sellers own the convertibles, this is also considered by many to be covered shorting and not naked. If the issuer of the convertibles is on the Federal Reserve list of marginable securities, then the owner can conduct their shorting with a U.S. brokerage. If the issuer is traded on the OTCBB, then they will often use a Canadian brokerage because, in certain situations, they do allow shorting OTCBB securities.
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Subject: RE: convertibles.. Thats right; and the beautiful thing about this
From dotOB
PostID 398665 On Monday, April 25, 2005 (EST) at 2:35:41 PM
Response To: biajj PostID 398661
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Brian,
I've known all along that this has been killing the share price the most. There are many other BB stocks out there that make higher runs on nowhere near the kind of story we have. We are never able to put 2 good days together with this stock and it always has baffled me as to why. The question now is how long all those shares are going to take to digest. My guess is at the current rate it's going to be a while.
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Agoraconianediggers just don't get it.
and the above courtesy of PTSC board on Agoracon...lol
they (PTSC) are allowed to post this stuff without reprimand.
AI
