John, you want to cover your short on a stock with a floorless convertible (i.e., discounted convertible) when the conversion process is allmost but not quite done. The best way to find out when this is, is to phone the CFO of the co. and ask how many of the convertibles have converted. I did this about a month ago with BASEA, and I found that most remained to convert. See an earlier post.
Other than phoning the CFO, the alternative is to guess, based on a chart. If you look for a price decline accompanied by higher volume that began around the time of the final S-3/a, and if that volume dries up, then that might be the time. Trouble is this isn't a perfect indicator -- in the case of BASEA I saw this indication in the chart in the Spring, but a call to the CFO revealed that most of the converts were still unconverted. Y
et another possibility would be to compute the number of days of volume required to flip all the converts, based on average volume, stock price and $$ amount of the private placement, and then counting beginning at the last S-3/a, wait some multiple of this, for example 2X or 3X the number of days of volume to flip, and then cover.
Overall, the attraction of short selling discounted converts is the knowledge you get, mainly from the SEC filings, of both the timing and the extent of a kind of institutional selling that is generally quite predicatable. So your question is an important one.
Hope that helps. |
