RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Not even able to sale their products
Vulcan wrote:
the company is far from going bankrupt
That what I'm saying. You just don't understand what I'm saying.
That's why I asked if you understand reflexivity.
I know all you want is positivity and I am telling you that no long term institutional investor worth his salt is going to touch the equity unless the bonds are closer to par. Think about what a high yield bond trades at 1 year from maturity. Even if the bond were at 80 it would give any investor pause. These bonds are at 27.
Now you are certain the company is "far from going bankrupt". On that basis, you can assign a probability to that statement and look at your potential outcomes to assign an expected value for where the bond should trade and compare it to where it is trading. Does 27 seem right to you after doing that exercise?
If it does, might I suggest to you that you are not as bullish on the company as you think you are. If it seems like the disconnect is too big then you understand my investment case.
The equity holders say the enterprise value of the company is ~$265m while the bonds are saying the company is worth $90m or maybe a bit less if you consider the ~$8m in interest that will be paid on the bonds if FIRE continues as a going concern.
So that's where we are. As an equity holder you are trying to capture the value above $265m if you are buying at this price and I hope you do very well. As a debenture holder, I'm trying to capture the value from $90m to about $163m plus the 8m in interest. So the upside for the bond holders is capped at $81m vs the investment of $27m while the equity holders upside is wide open above $265m. The bonds are convertible so they do start participating again at some point but it's not relevant to the analysis.
The reason why I mention negative things because I don't want to give anyone the impression that I know what will happen. I don't have a god damn clue. This is not investment advice or fortune telling.
All I know for sure is that the value of the converts don't make any sense relative to the equity. So yeah if $5m dollars of buying came into the converts for any reason they would probably go up a 100% but that's like a week's volume on the equity and only 5% of the equity market cap.
There could be positive benefits. The bonds going up might signal to institutional equity that they should buy the stock and FIRE might be able to raise some cash at a higher price than they otherwise would have(if they need it) thus reducing the potential dilution to equity holders.
That's an example of reflexivity as I understand it but I could be wrong about that too.