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Quarterhill Inc T.QTRH

Alternate Symbol(s):  QTRHF | T.QTRH.DB

Quarterhill Inc. is a Canada-based company, which is engaged in providing of tolling and enforcement solutions in the intelligent transportation system (ITS) industry. The Company is focused on the acquisition, management and growth of companies that provide integrated, tolling and mobility systems and solutions to the ITS industry as well as its adjacent markets. The Company’s solutions include congestion charging, performance management, insights & analytics, analytics, toll interoperability, mobility marketplace, maintenance, e-screening, tire anomaly detection, multi-modal data, intersection management, and others. Its tolling includes roadside technologies, commerce and mobility platforms, audit and enforcement, and tolling services. Its safety and enforcement comprise commercial vehicles, automated enforcement, freight mobility, smart transportation, and data solutions. The Company’s wholly owned subsidiary is International Road Dynamics Inc.


TSX:QTRH - Post by User

Comment by v_guerrieroon Oct 24, 2021 10:32pm
285 Views
Post# 34043323

RE:Another picture - $50m 6% Debentures vs $50m common shares

RE:Another picture - $50m 6% Debentures vs $50m common shares

This is automatically converted into common equity in 2026, hence it is treated as equity capital.  It is subordinate to all debt.  

I've already explained that someone could synthetically create this debenture:
1. Buy the stock at 2.68
2. collect the dividends 0.25 at the 1.8% annual yield
3. Invest the remainder into a BBB debt ETF at 4.2% (0.55)

This is a profitable trade vs the debenture until 3.25 on the stock.  In other words you can short the debenture and do the above and make a risk free profit.  Institutions, if they buy, are buying at a much higher price.  And in fact, if they are not in a tax advantages structure, the interest income tax would reduce the after tax yield (by 1/2 for the highest marginal tax bracket) meaning the above trade is profitable until 3.50 on the stock.


So 1 of 2 things can happen.  

1.  Cabbie is right.  There is demand for the shares and there isn't enough supply prior to upcoming catalysts.  If the debentures sell out and the over allotment is exercised, then there is overwhelming demand from institutions in the stock at the equivalent of $3.25/share.  Then those that were unable to buy the debentures may find a way in buying the stock.  This is indicative of another ITS deal and continued positive views on the momentum of QTRH.

2.  You are right.  QTRH hoodwinked Raymond James. There is no institutional demand.  Raymond James and the syndicate doesn't sell out the debentures.  Over allotment is not triggered and Raymond James has to slowly find buyers of their holdings, putting headwinds on the common shares until all the debentures are sold.  There is no additional ITS deal and they are taking advantage of the price run up.
 

As always, the market has already priced #2 into the stock.  The common stock trades at a 0.57 discount to the debenture pricing.  Investors selling now have already assumed that QTRH has duped Raymond James and the syndicate of investors that bought all the debentures upfront.  


 

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