Quarterhill Inc T.QTRH

Strange relative prices?

[mrmoribund]

QTRH $2.58
QTRH.DB $1.02.10

Beats me why someone would sell the stock and buy the debentures at these prices.

If I were looking to hedge I'd buy the shares and short the debentures.

Of course it depends on your take on the company's future.

If the stock is destined to stay at $2.60 forever then you're better off with the debentures--though if interest rates rise you might have to wait until maturity to prove it..

If the stock is headed to zero then you're also better off with the debentures--though worst case they'd both go to zero.

If the stock is going to $5.20 you'll get a 100% gain (plus dividend) with the stock vs. a 34% gain (plus interest) with the debenture.

If the stock is going to $10.00 you'll get a 288% gain (plus dividend) with the stock vs. a 158% gain (plus interest) with the debenture.

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I suppose the argument for the debentures is that the scenarios where the stock does better than the debentures are all scenarios where the debentures do pretty well regardless.

[v_guerriero]

Yes, it is ridiculous.  The implied put value in the debenture is 0.80-1.00 per share. And the put only pays off if the stock is below the current price in 5 years.   Again, I think the institutions buying this though are not looking for 250-300%  returns.  They are good with 150% total return with very limited downside risk.  I think that is the only logical thing

[v_guerriero]

Debentures keep rising,  now implying $3.34 conversion price.  Down to 5.8% yield.  Common dividend yield at 1.95%. Common stock back to what Paul Hill paid out of his own pocket on sept 13.    

[Capharnaum]

Different risk profiles. If you look at pension funds, they are looking at investments with low downside risks and a good yield. If they can get extra upside, then even better. The stock only needs one positive news to rebound and move to $3. The debentures will be more steady until the stock gets closer to $3.80. From $3.30+, the premium compared to par will start to grow.

[v_guerriero]

Someone just bought 1M debentures or spent 10.3 Million dollars.   Total spent today is $15M, equivalent of 6M common shares.   Looks like the banks kept a bunch of the debentures and are getting an extra 3% return in selling this today.    

[fishowl]

Scotia was the big buyer and seller of the 1 million $ order. Strange they are not one of the underwriters. Any inventory the underwriters still have is in the money. Hopefully they will give QTRH a good resreach report.  Date & Time Price ($) Shares Change ($) Change (%) Exch. / Mkt. Buyer