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Orbital Engine Corp. Ltd. (OE) Message Board

  • jimbobrdnk jimbobrdnk Dec 8, 1998 7:56 PM Flag

    AAGPQ-Convertible

    I wanted to respond to your post about the
    convertible. I think there is still some misunderstandin about
    how this works, and I think I did a poor job
    explaining it before, so I want to take another crack at
    it.

    First though, there's been a lot of talk about dilution
    and shareholders ability to vote once this gets to
    15% as a means of protecting us. I think this is
    terribly misguided. RGC need never convert a share to kill
    OE. Remember that, because its very, very
    important.

    Here's the scenario (one scenario-there are infinite
    variations). Before Feb. 15, RGC can use their ability to
    convet at $4.50 to sell short without a capital outlay:
    they just use the warrants as collateral. So without
    spending a penny, they short say 10,000 shares at 3.25.
    Now given OE's low volume, this sale is probably
    enough to drive the price down some. Now they can either
    short some more, further driving down the price, or
    just put up a big block (for which there is likely no
    buyer-and still using the converible as collateral)for
    sale, capping the price or driving it down. Now they do
    this little dance for a while, forcing the price
    down.

    Now, you might say, what if DB suddenly announces a
    deal and the price shoots to $8. No problem, they just
    exercise their warrants and sell them at $8. So they
    bought 10,000 @ $3.25 ($32,500) which they cover at
    $4.50 ($45,000) and sell those right quick at $8
    ($80,000). So they lose $12,500 on the short, but make
    $80,000 on the long for a cool profit of $67,500. See how
    easy that was? And with *ZERO* risk.

    If there's
    no anouncement they could continue to short and
    cover. A short at $3.25 covered at $2.50 is about a 25%
    return. That's $75 THOUSAND on every 100,000 shares they
    short. And under this scenario (no announcement) they've
    driven the price down 25% WITHOUT buying a share. No
    dilution. No vote. No risk. big return.

    Now here's
    where it gets really insidious: After February 15, they
    have the right to buy at the average of the lowest
    three days price. So the little risk they HAD (in the
    example above, the difference between the short price
    ($3.25) and the warrant price ($4.50) disappears
    entirely. So what tiny, tiny, tiny incentive they might
    have had to go long only is wiped out.

    There is
    no risk to this scenario. NONE. NADA. There is (as
    we've all seen) TONS of risk of going long.

    Why?
    Why? Why? WHY would RGC choose to go
    long??????

    They wouldn't. And they won't. It's not unjust. It's
    just business.

    OE has to close out this deal
    before it kills us.

    J

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    • It's not an issue because the methodolgy does
      work, however, central injection has been optimized by
      Orbital's engineer. Side injection needs to progress in a
      similar manner. Each customer's engine is different.
      Eventhough we are dealing with the basic 4 stroke concept,
      every engine design is different and requires its
      components to accomodate the new methodology of delivering
      fuel to the combustion chamber. According to Ken
      Johnson, he was positive that the same results can be
      obtained with side injection as with central injection but
      additional engineering work was needed to optimize the
      results. It's my opinion that this was not done or minimal
      effort was expended in an accelerated schedule that a
      complete optimization was not achieved. This probably
      influenced DCX to determine that OCP side injection was not
      competitive compared HPDI and additional work was required.
      This is pure speculation on my part. But from my
      experience I found many companies who come to market with a
      product that cannot compete and hoping that the consumer
      will be accomodative for you to improve the results is
      not realistic. This is asking for major trouble and
      cause for failure of your product line to win
      signifcant market share. Its better to be late and if your
      competition is having similar issues to contend with, you
      ought to wait and use the time to enhance the product's
      performance.

      The "unfinished" state of side-injection
      should not weaken OE's relationship. I believe the OCP
      concept to fuel IC engines, in this case gasoline, is
      basically sound and has been proven in the retail market to
      work. It's accomodating the new technology into
      existing platforms that is the challenge and that
      challenge is equal to all who wish to employ DFI, high or
      low pressure. Otherwise they would need to design new
      engines which require more time and money.

    • If it's any consolation, I've never had a reply
      to my e-mails either.
      I can say, my phone calls
      to 'Investor Relations' has always been answered in
      a polite and professional manner. I don't think
      they have the resources to respond to everyone's
      e-mail.
      Can't say more than that
      really.

      Regards,
      George

    • Haven't been able to read the board all day, so
      this response is inregards to some messages posted
      earlier.

      George, when I first saw your post about the board
      meeting and I asked where did you here it from, the next
      thing I did was e-mail the company. Now, I've e-mailed
      the company twice before and have never received a
      reply, so I was really expecting one this time either
      (and, of course, I never got one).

      You
      wrote:

      <<The company's lawyers have dictated that officers
      should not respond to shareholders in writing. Rest
      assured your e-mail along with others is receiving
      attention.>>

      First of all, what kind of company will not respond to
      its own shareholders in writing? What are they so
      afraid of? Do they think that they have made misleading
      (illigeal) statements in the past and the attorney's are now
      trying to prevent it from happening again? Why, why, why
      would you advise your client to not respond to the
      owners of the company?

      And yet . .
      .

      <<Dear Mr. Renneberg
      Thank you for comments on the
      issue of the convertable notes. I know all the
      directors are very mindful of their duty to represent the
      interest of the Shareholders to the best of its ability. I
      will undertake to ensure that your views on the
      convertable notes will be considered fully during management
      and Board deliberations on this and related
      matters.

      Best Regards
      John Beech>>

      . . .
      renneber received a reply. I'm assuming, but I think I am
      correct, that renneber must have e-mailed OE after me and
      I'm sure others. No one else that I know of received
      a reply (BTW, renneber, I'm NOT accusing you of
      anything, just pointing out that you ACTUALLY received a
      reply).

      It seems obvious to me, that OE does reply to
      e-mails and in writing. However, there must be some
      secret qualifications to actually get a reply. I've
      owned OE for close to 3 years now, but if I owned it
      for one day, the company should respond to a
      shareholder.

      Day by day, I lose more respect for the management of
      this company. Oh, I know . . . they are signing deals,
      but it is hard for me to invest in a company that
      treat their shareholders so shabbly, in contempt, and
      as the advesary.

      Do they grasp what they are
      doing? Do they comprehend that for all of their
      wonderful technology, that if they alienate their own
      shareholders, why do they think company's might question if
      they should do business with them? I could go on, but
      now I'm just venting. George, didn't really mean to
      direct this at just you, but like I said just
      venting.

      Regards.

    • I'm not doubting your veracity, but that is about
      the strangest thing I have ever heard.

      I
      routinely request information from companies, either by
      letter or email, and it is rare indeed that a request go
      unacknowledged.

      I would certainly never invest in a company that
      can't be bothered to respond to such
      requests.

      Now I realize this is a little different, but it
      appears to me that Maverick has gotten ample resonse from
      OE, and someone else posted today or yesterday the
      text of a response they got from OE to their statement
      about RGC.

      So what's going on here? I stand by
      my comment, it is grossly unprofessional not to
      respond to shareholders. Period. I did not solicit any
      information, only an acknowledgement that they got my email.
      If I'm going to take the time and effort to meet
      what I feel are my obligations as a shareholder (to
      voice an opinion on important issues, right or wrong),
      they can AT LEAST acknowledge it. I gotta tell you I'm
      really, really pissed off. Its just so
      amateur...

      Getting off the subject, it seems to me that if OE
      decides to redeem the convertible, you will hear NOTHING
      tomorrow. If the board votes to redeem, then they will need
      some time to arrange alternative financing. In the
      mean time, if they tip their hat that they've made
      this decision, RGC will just short the hell out of the
      stock from then until the redemption is
      complete.

      I would bet all my approaching-worthless OE stock
      that they do not redeem the convertible. I haven't
      seen them make ONE sound finance/market related
      decision in all the time I've been an investor. Except the
      DMG deal. But their track record still stinks.


      And yes, all of this doe make me feel like an idiot
      for continuing to hold. But hope springs
      eternal....

      Cheers,

      J

    • I'm afraid I don't have sufficient knowledge to
      answer your question. As 60% of OE is owned by Americans
      I would assume US shareholders would have the same
      rights as Nabisco
      shareholders.

      Regards,
      George

    • A couple years ago a campaign was raised against
      RJR Nabisco to force management to spin of the
      Nabisco unit to shareholders. Two men who held 10 - 15%
      of the company had this added to the proxy statement
      and it was put up to a vote by the
      shareholders.

      Can this sort of action be taken against Australian
      companies? Can Australian companies be sued by shareholders?
      It seems like their is a new lawsuit by shareholders
      of U.S companies every week.

    • I would like to ask you, is the reaction in your
      opinion justified?
      If for instance, the convertible is
      not retired, the share price in Australia will suffer
      very badly. It is almost down to its 1984 issue price


      Regards,
      George

    • I think it would be better to confine your
      frustration�s to the central theme, the convertible.

      You
      can understand the company better when you're armed
      with the right knowledge.

      1. The company's
      lawyers have dictated that officers should not respond to
      shareholders in writing. Rest assured your e-mail along with
      others is receiving attention.

      2. The company has
      a highly motivated workforce and conducts its
      business in a professional manner.

      3. The deals
      announced todate is the result of hard work by its staff
      and engineers, often separated from family and
      friends for long periods of time in foreign
      countries.

      I have nothing but admiration for the company in
      its endeavours to secure deals in a very difficult
      market environment. If the Asian crises never happened
      we would now be seeing 2 stroke auto's going into
      production.

      Now the convertible: I was informed by my
      Stockbroker that no matter how many deals Orbital secured the
      share price will always be in jeopardy because of the
      way companies like RGC operate. Ruthless is the
      correct word. Management have shifted the level of risk
      from the company to shareholders. The company can
      continue to operate as a going concern, it's just that
      shareholders are faced with an unnecessary risk.

      REDEEM
      THE CONVERTIBLE ASAP.

      Regards,
      George

    • ..I didn't really expect one. The e-mail didn't come back, so I suppose they got it. Roodnik

    • I sent OE an email four days ago, along with the
      rest of you, and received no reply. Now I realize it
      normally takes *WEEKS* to get an email ready to send. I
      mean, it's just so ARDUOUS to say, "thanks for your
      comment, we'll take it under consideration."

      What a
      *WELL* run company OE is. Right on the ball.


      That's just bullsh*t. You don't treat your investors
      like that.

      Am I supposed to believe they treat
      their customers any better?

      Maybe Ford sent
      them an e-mail a couple of years ago wanting to go
      into production, and they just couldn't be *BOTHERED*
      to open it.

      They are just SO BUSY giving away
      this company to RGC that they can't be bothered
      talking to their shareholders.

      I just can't
      believe I gave my good money to these
      ^$(&^$ers.

      *IDIOTS*

      Thanks for nothing, OE. AGAIN.

      J

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