RE:RE:RE:RE:RE:crazy My question is, if MMCap is holding debs plus roughly 50mm shares, it would not make sense for them to have a hedge in place via shorting, correct? Wouldn't being long 1 share and short 1 share just wash out. Therefore wouldn't it make sense for them to dispose of their long position first before putting a short hedge in place?
WealthBuilder99 wrote:
Hi StayInvested, appreciate your input on this board. I just wanted to correct you on one point to help further this discussion. The 11.06% rate is not paid via shares, it is paid via a second series of non-tradeable debentures which do not bear cash interest or convert into shares, so their blended cost would not decrease as you stated through additional shares, but obviously still get the benefit of the 8% interest plus 11% accretion which will eventually be paid in cash. So overall it would seem they would benefit the most if the shares increased in value and the debs convert.
Hope this helps.
StayInvested wrote: Why are they better off to convert and sell? Your simple math there doesn't fully appreciate how much they are actually benefitting.
First, that is a recurring rate annually. Meaning they are making 11.06% per annum, not 1 time. That rate is paid via shares, valued at $0.285, at a rate of 3508 shares per debenture unit ($1000). So, if they owned 26 million of the remaining debt, they are actually receiving almost $3mil worth of share annually at that price. Meaning their "blended" cost base gets lower the longer they do it.
Not sure why anyone thinks they would let the brakes off this when they have that occurring.