re: 'calling the note' from Castle Creek, and forcing conversion now that the deal is done:
When CC converts the bonds to common stock, it's at the price of $6.37/sh (the 900k warrants are priced $5.92, that's a different matter though)... The original $20M of convertible bonds sold to them would be redeemable for over 3.14M shares (due to the inflation factor since the deal was signed). By our count of the hedging performed last winter, CC appeared to have shorted over 2.5M shares (net of 'trading around' their position, as they box and unbox their shorts).
Conversely, if they were to let the note be called back by WSTL, CC would only get paid back 125% of $20M, or $25M. AND they would still be short over 2.5M shares.... there's no way they could cover those *now naked* shorts in the open market. Not with the stock north of $30/sh, they'd have to spend over $75M to replace the shares we believe they were short *before* this week began. (Not sure if the warrants get revoked in that case; if CC gets to keep those, that lets them buy 900k at $5.92... still leaving 1.6M naked shorts to cover.)
That's why it's 'checkmate' for them, and they will blink and convert as soon as WSTL 'gives them the call.'
Regards!~
PS Expect we'll be bumping $40/sh within a few weeks (yeah, I know I'm conservative, LOL!). |
