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[QUOTE]Originally posted by glassman: [QB] it seems to me that the PIPE deal has something to do with the naked shorts. i've searched far and wide, but i've never been able to find out [b] exactly[/b] how they create the naked shorts... even superior stock pickers like the motley fool were unable to decipher how it works for along time, then they started doing shorting themselves, so i suppose they figgered it out. i suppose there must be a couple of ways to do it, but "toxic financing" seems to be one of the no-lose plays in the market... death spiral convertibles is what the old-timers called it... [b]Death-spiral convertibles are privately held preferred stock or bonds that can be exchanged for shares of common stock. An investor will offer a company cash in exchange for a percentage of the company, but with a catch: The investor wants a guarantee that the investment's value won't fall (or won't fall much). If the stock does fall, the investor gets more shares -- and a bigger stake in the company. If Acme's shares rise, the vulture capitalist keeps 30 percent of the business and makes money. [See chart.] But Let's say the stock price is cut in half-which means, of course, that the value of the company is cut in half. By the terms of this death-spiral convert, the vulture's stake cannot fall below $25 million. So instantly, a pile of new shares is handed over to the vulture capitalist, and his stake rises to 50 percent. And if the stock ever recovers, he'll still own half of Acme.com.[/b] http://findarticles.com/p/articles/mi_m0HWW/is_11_4/ai_71886195 [/QB][/QUOTE]
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