Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Sepracor-Looks very promising -- Ignore unavailable to you. Want to Upgrade?

To: Ed Ajootian who wrote (991)	7/9/1998 9:54:00 AM
From: Biomaven	Read Replies (2) \| Respond to of 10280

Ed & Bruce, I don't think it is correct to say there are immediately 11% more shares when the convertible starts to be in-the-money. The correct way to look at it is to use the Treasury Stock Method, which is what is done for the purposes of calculating diluted shares for reporting purposes (FAS 128). Under this method, you assume the conversion, and then use the proceeds of the conversion to buy back shares at the market price. This means that the dilution is gradual as the stock price rises. Even at a stock price of twice the conversion price (around $95), the dilutive effect would be only half of 11%. From a stock price perspective, this only becomes relevant if and when the convertible owners decide to lock in their gains by shorting the common. As Ed says, this is unlikely to happen for a while yet, although for an institution that can get interest on the proceeds of a short sale, shorting now is not a crazy idea if you are risk-averse. (They end up with the interest on both the convertible and on the proceeds of the short, but lose any potential gain in the stock price). Bottom line is that this "barrier" is probably more psychological than real right now. Peter