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Technology Stocks : Citrix Systems (CTXS)
CTXS 103.900.0%Nov 2 5:00 PM EST
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To: Chuzzlewit who wrote (6672)6/11/1999 2:22:00 PM
From: Biomaven  Read Replies (2) of 9068
 
CTC,

The reason is that if the price of the stock is below the conversion price trigger then the extra shares that would be counted by dilution won't appear on a fully diluted basis. They will appear only if the price of the stock is above the trigger.

This was the correct way to treat the convertible debentures under the old APB 15. However, under the new standard, FAS 128, the relationship between the conversion price and the stock price is irrelevant for convertible preferred and debentures. (Of course it is still very relevant for options and warrants).

Instead they are treated as described in my previous post - you always include them when their effect is dilutive, which is when the interest payments exceed the basic earnings attributable to the shares you would get if converted.

Peter
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