throw the dice on ERICY ?

S

SethArb

I am curious if any experienced traders
here would consider a small bet on
this well known name at these levels

I know this sounds silly and I usually do not
even look at stocks under $1.

it seems like ERICY is going to allow shareholders of record
on 8/13
to purchase an additional share at approx 40 cents ?

so this looks tempting to me .... if I buy 500 shares
next week I would have the right to an additonal 500 shares
at an approx 50 % discount to fridays close?

Ericsson Press Releases
Ericsson sets terms for rights offering
Date: Friday, July 19 2002

One share of series A or series B of Ericsson, held as of the record
date of August 13, 2002, carries the right to subscribe for one new
share of series B. The subscription price is SEK 3.80 per share.
Equivalent terms are offered to holders of the Nasdaq-traded ADSs.
 
"Rating agency Moody's Investors Service issued its verdict on Ericsson's prospects on Friday by cutting its credit rating to Ba1, in the junk category, and continuing to review its rating for possible further downgrade pending completion of the rights offering."
"Standard & Poor's is expected to follow with a similar cut in the next few weeks, making Ericsson the latest company to be labelled a 'fallen angel'. The agencies feel that even with the cash from the rights issue, there will be pressures on the company's liquidity."
"Ericsson said the downgrade would not affect its plan, announced last week, to issue about $3.2 billion US in new stock".
"The underwriting banks can back off from the issue if Moody's lowers Ericsson's rating to B1, or Standard and Poor's lowers its rating to Double-B-Minus. "
"Ericsson believes such a scenario is unlikely," the company said in its statement."
"Shares of Ericsson were at 80 cents midday Friday on the Nasdaq Stock Market, off 20 cents. "
 
Seth,

I took a flier recently on LWIN. Gabelli funds has snapped up 12% of the company, so I figure what the heck. Barrons runs a weekly section on 13D filings which can give you some decent ideas. As for ERICY, why not as long as it is not money you ever expect to see again. At these levels it is possible for a snap back rally, a take over, or a complete nose dive.

My preferred method on these types of trades is to diversify into numerous situations rather than just one like LWIN or ERICY. Where I think there is real value is in the debt. The charts of most junk funds and bonds look just as bad as the chart of most telcos. The difference is the yield which is around 10% give or take. When the companies and or economy snap back then the bond values will increase, and in the mean time you can collect a check.
 
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