A positive third party view, page-5

Hi Bookend,

You are right, we were speculating about who was shorting the stock previously and thought that it could be warrant holders. I even talked to the CFO about this and he thought something similar. However, it appears that we were wrong, at least in thinking that these were the ONLY guys short selling.

I too dispute James' view that the shorts must be covered in the next several weeks. They only have to be covered if the owners of the stock call them back, or if the situation becomes untenable for the shorters - e.g. if the SP suddenly rises on a takeover bid.

The shorters can potentially ride their short positions all the way down to their stated fair-value view of zero, which would imply QIN goes into liquidation.

The shorters could well be a combination of different parties including Glaucus, tail-coat shorters, warrant holders, etc.

For the warrant holders, they have been playing a different game to Glaucus, if they do in fact exist. Now that the SP is below $1.28 (the warrant strike price) they have an interest in closing their positions out and allowing the SP to rise materially above that figure before, once again repeating the process.

I am pleased that my logic has at least been similar to James' as he has outlined a similar position to me re the TO, whereby one scenario is that FW/ Institution secure a large stake in QIN and take effective control with <50% holding. They burn the shorts and QIN continues on its development journey with some lessons learnt about what not to do re their Chinese supply chain.

One possible variation to James' logic exists in that FW/ Institution undertake a leveraged buyout and then spin off Santalis in a US IPO to repay the debt used to buy out QIN.

Cheers
John