Post by
Stratocheif on Oct 15, 2021 11:15am
People who buy convertibles
Buy them as a bond expecting to get the attractive...in todays environment... rate and get thier money back at maturity. The prospect of it going in the money is an added plus but it shouldnt be the main reason to buy it. Since 2008 when interest rates collapsed ive bought dozens of these. Most have honored thier commitment and paid at maturity because they have no problem refinancing. (Thats why due diligence is vital and buying a solid company is the way to go even when buying converts. Ive had a few that made it in the money and that was great. Ive had a few that went into financial problems, gave out shares but not one of these had a good outcome. 4 or 5 went from bad to worse and eventually insolvency where the shares you got went to zero. If you get shares instead of ur money back you are stuck with a potentially sinking company....thats why they give shares in the first place because they cant cough up the cash to redeem them. Just because ivq trades at around 2.50 cdn today how do you know where it will be trading next year. Bad news here no matter how you rationalize it. For those who like to gamble with the wild swings in sp after getting shares for thier convertible go for it. Its a high risk game being played with a company thats no longer attractive as an investment. I was watching an analyst yesterday discussing health care REITs. He said stay away from ivq...too high risk. Ive had the ivq debentures for about 5 years ( seemed like a good play at the time with sp around 10.) So i got about 25% back from 5% annual interest pmt. And they will give me 22% back so 47% back. The rest i will just write off as potentially going to zero...hopefully collect some more interest before either that happens or they turn it around and all is well Good luck to all