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Technology Stocks : Global Crossing - GX (formerly GBLX) -- Ignore unavailable to you. Want to Upgrade?

To: trainleaving who wrote (11262)	5/16/2001 9:58:20 PM
From: Ally	Read Replies (1) \| Respond to of 15615

>So, when do preferred stock holders cover their hedge positions? Do they wait until the conversion price is reached? Isn't there a timeline associated with their conversion?< There is a redeemable feature on each preferred series, and commonly, this is when the shorts are covered. For example, GX can redeem the 6.75% preferred issued in April 2000 starting in 2005. If an institution has shorted at $60, and the preferred is convertible at $39.60, the gain ($60-$39.60=$20.40) is crystallized when the preferred is converted to common shares just before it is redeemed. Of course, the institution can also engage in speculative trading and decide to close out a short position by buying back stock from the open market. May happen, but not common, since institutions buying preferred stock do so with an "income" objective. They like the regular dividends, and would regard the profit from the hedge as a bonus awarded to them by overly exuberant investors who pushed the stock over the conversion price at such an early stage.