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Strategies & Market Trends : A.I.M Users Group Bulletin Board
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To: OldAIMGuy who wrote (5139)7/23/1998 7:25:00 AM
From: JZGalt  Read Replies (1) of 18928
 
Tom, Since most small to midcaps are flat on their butt pricewise, issuing convertible stock would not be advisable at this point in time. Their price relative to their expectations of their price is too low. Would you seriously consider buying VLSI bonds at 6% with a convertible value in the $50's? If they price the bonds to sell they would suffer unnecessary and large dilution of their stock if the converts are in fact converted at some later time. The reason to offer convertible bonds is to lower yield prices. That just isn't necessary now. What they might do is to offer to sell straight bonds which are not convertible. That would lock up the cheap money for a longer term.

Of course you also have to have some expectation that you will eventually use the money and that by waiting you will have to pay more in interest rates in the future. Since the common wisdom is inflation is "tame", their just isn't the pressure on the second part of that equation.

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Dave
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