Replies to post #321 on ExpressJet (XJT)

[downsideup]

I've been posting more on Yahoo...

It does seem likely that the current market dilution risks, in some part, were pre-limited as some of the conversion shares were probably pre-sold. My guess is that their average presold price was close to $1... but it could be more. Likely was the note holders shorting... to drive the price down to force conversion at more favorable rates... more shares per note... and they did get 75% of the stock for half of the debt they held. Now, with the shares in hand, they can cover the shorts and convert notes worth only $500 in the market, into a face value of roughly $2700... just by covering the existing shorts. That, and they still hold shares, and still hold notes that now have a higher coupon.

My look in the rear-view mirror suggests that the note holders converted half their notes into a value that exceeded the face value of their entire original investment. They still have half the debt in hand, and likely still own the majority of the company, too... ???

Add to that... we're not done yet...

It SHOULD raise questions about the naked shorting that did occur. Some obvious concern here about who was lending shares to be shorted... when perhaps there weren't all that many shares to be had to be shorted ??? The shares were authorized, but they weren't issued... so to the degree un-issued shares were used to short against, those who were shorting them were violating the exchange rules by conducting an unauthorized underwriting. THAT is a new wrinkle on complaints about abuse of or by shorts that I've not heard before...