Mike: debentures per se do not trade. What P.R. probably referred to is probably January 31, 1998, when the debentures may be converted to shares at the option of the holder (who may elect to collect his 8% until December 19, 2002)...refer to next paragraph = extract of TCT news release of December 19, 1997:
"Thermal Control Technologies Corp. (ASE:TCT NASD OTC BB:TCTCF) is pleased to announce it has completed the closing of its previously announced prospectus offering of 8 percent redeemable unsecured convertible debentures ("Debentures") at a price of $1,000 per debenture raising net proceeds of $7,000,000 on the sale of 7,000 debentures. The Debentures will mature on December 19, 2002 and each Debenture will be convertible at the option of the holder into common shares of TCT at any time after January 31, 1998 and prior to maturity at the conversion price of $1.60 per common share, being a rate of 625 common shares per $1,000 in principal amount of Debentures. CIBC Wood Gundy Securities Inc. acted as agent for this transaction."
What does this mean? I am not a specialist in convertible debentures (so if I put my foot in my mouth, somebody please correct me), but following is my understanding:
If I were a holder of the convertible debentures, I could do either of three things:
1) I could decide to collect my 8% per year, and, in December 2002, I could convert my debentures into TCT shares at the price of $1.60 thereby hopefully making also a tidy profit as the market value at that time may be $5, or $8 or whatever.
2) I could decide to do a quick flip, i.e. on January 31, 1998, I would convert my debentures into shares at $1.60 and sell the shares immediately (maybe at $1.75 or $1.80 or whatever) thereby making a profit for having held the debentures for about five weeks.
3) I could hold the debentures for any time between 1) and 2).
Now, some people will do 2). Which means that TCT shares will temporarily come under selling pressure around January 31/early February 98. And it is likely in anticipation of that that some other stock holders currently sell until the selling pressure is over (at which time they may buy back in (if they so wish).
This in no way decreases the fundamental value of the company; it issued the debentures to finance a manufacturing plant to satisfy increased sales. If you are a long term investor (I am), I don't see any reason to worry. If you thought of buying more shares, end of January, early February would probably be best timing.
Cheers.
Saverio |
