Biotech Valuation Message Board

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Biotech / Medical : Biotech Valuation

CRSP 52.51

+2.7%

3:59 PM EST

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To: aknahow who wrote (6157)	4/13/2002 8:50:20 PM
From: Biomaven	Read Replies (1) of 52153

The conversion feature was floorless. as the price of the stock goes down the number of shares that must be issued upon conversion goes up. No these were not floorless - the number of shares was fixed. Currently these are what are called "broken convertibles" because the conversion price so much exceeds the current stock price. Essentially at this point they are straight bonds trading at a discount. SEPR essentially repurchased them at a (slightly lower) discount using stock instead of cash. From a valuation viewpoint this was interesting. The move increased the fundamental value of the company (by reducing the credit risk by strengthening their balance sheet) but it caused an immediate drop in share price (because the convert holders shorted (or sold) the stock. From my valuation perspective such a dislocation shrieks "buy." Peter

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