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Technology Stocks : MRV Communications (MRVC) opinions?
MRVC 9.975-0.1%Aug 15 5:00 PM EST
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To: Duffeck who wrote (32043)5/16/2001 7:05:24 PM
From: akmike  Read Replies (2) of 42804
 
Hi Duff,

**I don't think these folks will voluntarily convert unless forced to do so.**

Exactly-they won't give up the interest on the bonds and their call on the stock until they are "forced" and MRVC can't force anything until after June 15, 2001. (and only then if the MRVC stock price is well above 13 and change.)

**So Mike, why wouldn't they (the bondholders) just take the money and cover their short positions if MRV called the bonds trying to force a conversion.**

Because the way they are "forced" to convert is that they will lose economic value by having to cover their short position in the market rather than receiving the conversion shares instead of cash for the called bonds. This is why the price must be greater than the conversion value to force conversion. Arbitrage will enter in here also once the bonds are called. At that point some enterprising trader will arb the spread between the daily market price of the common and the "converted value" of the bond. You must recognize that the present holder of the bonds are very risk-averse. They have traded into a certain 5% return with no downside and nominal upside, these folks are not interested in a riskier position such as a naked long or short in a volatile investment like MRVC.
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