Gerald, not only "riskless, if they sell short today at let say $8, they will sell short enough stock to cover their debenture (450,000 shares time $5.5 is $2.5 MM), they get in this transaction $3.6 MM, and now, they do absolutely nothing, so they pocketed $1.1 MM already, they get paid 9% on the $2.5 MM (but have no money committed), and if the stocks rocket to $100, they have no risk,
I read the post you suggested but I still have one question: I assume that the $5.50 conversion price is what they paid for the bond, so they don't ever have to put in any money to convert, right? They just hand in the bond.
It seems that the only possible way for them to lose is to short it down and then suddenly the shares rise so fast that they can't convert for the amount they're short. But, of course, this won't happen because if the company had prospects they wouldn't have done a deal-with-the-devil-type financing in the first place. |
