Mood Media Corporation T.MM

Debentures: a Case in Market Inefficiency

[injailforgood]

The 10% 10/31/15 convertible debentures are trading @ $99, yet the company has announced a fully back-stopped guarantee for the redemption of this security at maturity. Therefore, the stock has the safety of a high grade short-term debt security - yet the yield to maturity is currently sitting at 12.4% - 5% coupon in 5 months (first illustration below). This makes no sense and proves, once again, how the market can be inefficient.

A more reasonable price would be $103. Someone paying $103 today would pay virtually zero accrued interest (semi-annual coupon just payed on 4/30/15) and received $100 at maturity plus $5 coupon. So, they would incur a $3 capital loss but receive $5 - for a $2 net return, or 2.83% annualized yield (second illustration below), or about 250 bps higher than money market.

Accrued Interest:

$750.00

Invoice Price:

$99,750.00

Yield-to-Maturity:

12.38 %

Yield-to-Call:

12.38 %

Purchase Price:			Yield-to-Maturity**:	%
Call Price:	$		Yield-to-Call**:	%

94.496.7699.12101.48103.84

04.949.8814.8219.7624.7029.64

Accrued Interest:

$750.00

Invoice Price:

$103,750.00

Yield-to-Maturity:

2.83 %

Yield-to-Call:

2.83 %

Purchase Price:			Yield-to-Maturity**:	%
Call Price:	$		Yield-to-Call**:	%

99.12101.48103.84106.2108.56

-9.12-4.5604.569.1213.6818.24

[injailforgood]

This on top of the fact that the stock itself has shown no positive response from this monumental debenture solution accomplishment. In fact, the trading volume has fallen right off the map just when then the debt has been dealt with and the company is ramping up product, partnernerships and business and has streamlined the business. Go figure.

[dreaddogs]

it appears the former chairperson was selling . this is why the price did not go up any further. it appears that he was pissed when he was canned from his "Salaried" position of Chairperson. ( I heard it was in the 6 figure salary range ) I believe the former chairperson was a good friend of the former PREZ...

[injailforgood]

Hey dread - can you find out how much Mr. Von Stauffenberg has left?

[dreaddogs]

I thought he ran out plus I am surprised that he is being nominated to the board which I will be voting against. In my opinion, any new fund managers does not want any management linked to the old regime....

[injailforgood]

I also thought that he had sold all his shares. Well, volume is pathetically low, which is neither positive nor negative... it's just... boring. The debt resolution was a profound accomplishment as debt maturities are off the list for several years, and now the company is laser focused on growth, efficiencies, new partnerships, new products & services, and free cash flow, and can spend all

[dreaddogs]

I agree that it was monumental but I think the issue was them not paying part of the debt. the question is how much free cash flow will the company generate? and when they do, what will they do about the debt. the existing debt is what is, in my opinion, is keeping the stock down.

[injailforgood]

Understood but I think they see opportunities (such as partnerships TBA) and other growth ventures (potential acqusitions?, new products, etc.) that they want to keep dry powder for. I believe the market wants to see an improvement in debt/cash flow - as the cash flow grows (denominator) and debt stays flat (numerator), this ratio could really start to come down - which I believe it is and will.

[injailforgood]

I see 554,000 worth of debenture being bid from 97.00 to 98.25. They will not be filled (unless the seller is extremely naive). They will have to move their bid up to at least 100. Even at $100 the YTM is 9.9% The seller should wait for $103 as fair value.