RE: RE: RE: to clarifyThe annual report has limited information. What I have seen on the balance sheet is a run of the mill ordinary mandatory convertible debenture which will be eventually converted into shares at the conversion price fixed at the time the debentures were issued.
It is common to have the redemption option that the company can exercise under certain conditions at its sole discretion. It is an option given to the company & in no way an obligation.
The convertible debentures have some privileges, they get interest paid & in case the company goes bankrupt before conversion then the debentures holders are treated as debt holder & are paid before the common shareholders. But on maturity the debentures have to be converted into common shares at the fixed price. The movement in share price is at the risk of debenture holder.
Lot of institutions use this instruments to invest in a company instead of common shares, because they offer some additional advantages, they get interest, they come before common shares & when the stock trades above the conversion share price the holders can short the stock & lock in their profit & continue to get interest. UUU has a short position of 50.6 million shares one of the biggest sort position on TMX. This short position is created by convertible debenture holders who have locked in their profits & are also getting interest till maturity. They have the option of buying back shares to cover the short position if the share price drops well below the conversion price & play the same game again if the share price pops again till maturity.
It is the debenture holder who benefits if the share price goes up & losses when the share price drops below the conversion price. The share price risk is on the account of convertible debenture holder.