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Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: Roger A. Babb who wrote (1166)	6/16/2000 4:33:00 PM
From: DrTender	Respond to of 1438

So far we only have calculated the averages (we will deal with individual statistics in future drafts). If you invested in a portfolio of death spiral issuers, you would have lost approximately 50 % of your wealth 2 years after the issue and about 70 % three years later. This is remarkable considering all the issues occurred in a strong bull market. Some interesting findings : (1) the worst performance (in the year after the issue) is experienced by companies that put a floor on the conversion price : apparently everyone "rushes to the exit" by shorting and converting before the floor hits. (2) The worst performance after 2 years is, paradoxically, experienced by issues with a short sale restriction ! (3) the best 2 year performance is experienced by a sample of companies that attach warrants to the deal. (4)The larger the size of the convertible relative to the market cap of the issuer, the worse the long-term performance. Our sample starts in 1995 and stops in August 98. Of the 277 companies 28 % were delisted by December 1998. For a copy email me a theo.vermaelen@insead.fr (This turns out to be simpler than through my Yahoo id)