The investors, on the other hand, have set up these deals so they can't lose, he said. "They don't care whether the company is a good bet. They buy and hold the convert but short the stock. If the company doesn't do well, they will make money on the short. If it does do well, they will make money on the [converted] stock."
Interesting comments, particularly in light of one of my personal passions..... getting an old Perseus-Soros company up to decent valuation.
In the T/FIF thread, we've discussed the potential that convert holders need not register shares that they've sold short.
In a recent discussion with rkrw and biomaven, biomaven indicated that this was the case.... that convert holders can short "naked". Please correct, me, biomaven, if I've misrepresented your thoughts.
If true, what constraints are put on the NUMBER of shares that a convert holder can short?
I don't agree with Purcell's statement that the companies need to have cash to service the debt. If the debt is out for a bit longer and a company has a decent Business Development capacity, that's just plain bull. What happened to good old balls-out biotech?
Thanks, very much, for posting that. I'd love to hear Purcell, who drove innovation at H&Q for years, on busted converts....... what to do after the "if the company doesn't do well" scenario has played out, and the short profit is in-hand (on paper, if not tucked away in deep pocket). |
