RE: RE: RE: RE: RE: RE: RE: RE: RE: RE: RE: RE: RE i dont think you get it... i dont really want to give you a free education but I guess i will...
so the value of the company doesnt change by converting debt to equity... all youre doing is re arranging the EV calculation... the total value is the same (EV = marketcap + debt - cash). now there is something to be said for supply and demand which you originally pointed out... if you have mass selling (that being the new shares issued to debt holders who dont want to hold stock) that will only happen once the stock is actually being sold, not in advance... upon announcement that its going to actually happen there is no change in EV... if anything, the stock probably goes up because at least investors know that the company isnt going to go bankrupt because the debt has essentially been paid. and I dont think holders of the debentures run for the exits as you suggest... obviously they own the debentures for the same reason that the shareholders own shares, that being that they think its a good company that should be profitable in the future.
so its not like its a mad dash to short the stock upon announcement, but if you want to escape any market volitility as the shareholder base adjusts, you simply short the stock before the date that the sellers actually get their shares, and then cover your position with physical shares that you recieve as compensation rather than having to buy them like you would in a traditional short. this only works for retail holders... obviosuly large institutional investors cant get that kind of borrow on a small stock like this.
that being said i am really just humoring you. this senario will not play out because the current shareholder base (ashanti, sprott, etc.) are not going to let thier position get diluted (from 20% down to 6% in ashanti's case) just so that they can pay off a debt that they can easily refinance themselves.