THRT slightly underpriced now. With Watson at 51, conversion value is $13.58. Yet it trades at $13. If anything, it should be trading over conversion value, not under. That is because if WPI goes up, THRT gains more than it loses if WPI goes down. If WPI goes to 40 (- 11), the conversion value is 11.84, or 1.74 less than current conversion price. If WPI goes to 62 (+ 11), conversion value is 16.24, or $2.66 more that current conversion value. This is due to the formula for conversion, which gives THRT more WPI shares per THRT share if the WPI price drops. Also, it is possible there could be another bidder to drive the price up. So I will bide my time for now. However, in the end I will probably sell. The Watson story still eludes me. They buy up companies and grow, but at their current size they are running out of room to do that, and their ratios are extremely high.
Geoff Wren |
