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Hersha Hospitality Trust Message Board

  • wizestman wizestman Aug 5, 2009 10:37 AM Flag

    Argentinian stock overhang...

    The new stock sold to Argentinians creates an overhang that will keep HT stock depressed. As I said in another post... the Argentinians can short the stock at current levels, and cover with the shares they get from the company at $2.50, which effectively dilutes the current stockholders. My take: I don't see this stock going up near term.

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    • The only trouble with your theory is to try and short over 5 million shares of HT would be impossible with average volume of
      288 mil. Try covering over 5 mil of shares of HT it would be called a short squeeze all the way to 100 dollars a share. You may pull of a short of say 50k and get away with it in a thin float, but not much more. The trade your talking about works very well in a large cap stock with a huge float. I'm adding on pull backs with a 2 year holding in mind and my shares are locked not in the float. The more shares I add the thinner the float.

      • 2 Replies to sjsrhs
      • There is a plausible incentive for the Argentinians to "short" the stock in the near term to enhance price-per share value, assuming they already control a substantial number of OP's shares. The Argentinian seems like a "worldly" investor who want's out of a faster-depreciating fiat currency, and his wealth into a hard & tangible, yet under-valued asset at that moment. He obviously feels HT is a better move than holding on to cash! What his expectations are regarding income, is another story. In that regard, then there is an incentive for him to accumulate now...particularly since HT's REIT status mandates a distribution to shareholders alike. Anyway you cut it, it is a good sign for HT, especially if the recovery happens soon.

      • One more thing to add is they are very limited in their availability to sell. If they want to sell they will have to find a large private party to buy or risk driving the stock to zero dumping just around 2 mil of shares. The more likely scenario is some where in the future HT buys back the shares at lot higher price like 1 1/2 book. This would transpire around the 10 dollar level and out 2 plus years.

    • Why would you sell at a discount. I rather not pay dividend and pay down debt.

    • This analysis is extremely faulty. The Argentinians can't short the stock because they own it. If they sold or "shorted", they would be selling their current ownership. Shorting is borrowing someone else's shares because you "owe" the security. And the dilution has already occurred, shorting wouldn't change any of that.

      If you are referring to the call options, they don't kick in until $3 (not $2.50) and you still have the issue of the Argentinians owning 10% of the company.

      Please don't post faulty ideas. There are plenty of reasons you could be negative on HT, it's a $3 stock for gosh sakes. It hurts your credibility when you make stuff up.

      • 2 Replies to stuff1948
      • Argentinean, or Argentine(s)....correct term for Argentina native.

      • I am very aware of what shorting a stock is. Thank you.

        The Argentinians cannot monetize any profits unless they sell shares at some point, right? So, why not do it immediately and get the profit? In such an arb trade, they short the stock and cover the short with the newly issued shares. By this transaction, they instantly record an arb profit, and there is no risk at all.

        More worrisome, when they short the shares, the excess selling creates price pressure which can also cause prices to decrease even further (so called price pressure momentum).

        While this is a possibility admittedly, the market is pricing HT on the belief that the Argentinians will not short the stock and instead become long-term investors. I will be analyzing the financial statements closely to see what to do now...

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