Chemtrade Logistics Income 6 50 Convertible Unsecured Subordinated Debentures T.CHE.DB.E

Effect of Debentures Maturing in 2025

[stockguy5000]

Very surprised nobody has mentioned the effects of these debentures on the trading.  These debentures were issued during the pandemic and mature in 2025 and have a conversion price of 7.35 and can also be redeemed EXTRA early by the company between Sep 1, 2023 and Aug 31, 2024 if the trading prices exceeds 9.18 over a 20 day period (I am simplifying here). The key trading range is 7.35 and 9.18 controlled by the debenture holders.  If you are wondering why anyone would short a high dividend stock hitting record revenue, it's likely because the debenture holders are locking in their gains by shorting the stock.  When Chemtrade was over 10 dollars and with interest rates soaring, it would make perfect sense to short because you are covered by the 7.35 share conversion - no risk.  Take the money and invest to cover the dividend payments or just make more money.  My feeling is that the recent volatility and volume is related to a nugget disclosed during the Q&A session during the conference call where they confirmed that a forced conversion of the 2025 debentures will happen later this year.  This means no more free ride on shorting fun for some and a decision to lock in what gains are out there for others.  From a cash perspective, they were already paying 8.5% and along with the cancellatin of the DRIP, there should be little effect on the cash flow.  Next set of debentures are due in 2026 have a conversion of 10.00 so expect some range bounding between 10 and 12.50 if the stock price increases that high.  So what does this mean?  If you believe that the company is headed in the right direction, then this is a great buying opportunity because the stock price is artificially depressed.  If you don't like the company, then sell and do something else.