John,
I have read and enjoyed your many excellent postings here and I have learned from them.
I believe Frank Palardy is quite right. I checked with some of the market makers in C-Cubes convertibles some months ago, and I believe they arbitrage long holdings in Cube's convertibles with a hedged short position in Cube common stock on the theory that the stock will go down faster than the bonds, and the bonds will go up equally, if the stock rises. They use sharp pencils, and I don't know how they make money figuring cost of capital, but it's not my business. I believe some of the short interest in Cube is this kind of shorting, I have no idea how much. With the common stock at $23, the bonds, convertible at $30 +, are selling around $97 (?) with a 5 7/8 coupon, if memory serves me. In trying to check, we are told by the company that essentially no bonds have been converted, which I find amazing, considering the volatility in the price of the stock.
As for talking to small investors.....I was a small investor myself once. |
