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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: Robert G. Ghazey who wrote (9763)	7/30/1998 11:57:00 PM
From: Saul Feinberg Jr.	Respond to of 42804

A good accounting book can help you with this. But I'll try. Any bonds bought, would have a secondary market after issuance. When a bond is issued for 1000 dollars, it means the present value of the coupons plus the original amount to be paid later, added together is 1000 dollars. As interest rates change, the bond's value changes. A few notes 1. At any snapshot in time, a bond must offer good enough yield for it to be marketable. 2. The original buyers of the bonds also make bets on the interest rate. So they can sell the bond if they have a different view of interest rate or decide to get a better investment, or thought that default risk on the bond has changed. Clearly, there is definitely, a market for the bonds after the issuance, even though it is a private placement. 3. At the time of the issue, the bond went for face value of 1000, which definitely had to be fair market value, otherwise no one would buy it. The original investor had reasons to buy it. Maybe he/she thought interest rates are going to drop, etcetera. At that time, stock price was 23. Since then, say, stock dropped to 19, the option component of the convertible has less value, and the bond is treated more like an ordinary bond, at which point, the 5 percent does not justify the yield. Not just the stock price changing, but interest rates change too, etcetera. The point is the Fair Market Value for that bond has to change. Sometimes it is higher, sometimes it is lower. So, then if you want to sell the bond, the buyer will be paid 1000 dollars five years later, so the present value clearly has to be less than 1000 dollars. It's really complicated, and especially since it is convertible, you had to price the option component of it when it is close to conversion price. In my example, I used 20 percent, which is not a realistic example. It is too big of a discount,and the math was simplified to explain it. But basically, the gist is that the bond can sell for a discount. But definitely, the discount would not be 20 percent within a month's time, because the original buyers of the bond, would not have made such a gross miscalculation. Obviously, the bond had to sell at fair market value, when it was initially sold. Otherwise, no one would buy it. I hope it makes sense.

To: Robert G. Ghazey who wrote (9763)	7/31/1998 9:27:00 AM
From: Seth Leyton	Respond to of 42804

Robert, I didn't say it was trading at a discount, I said it would. I've traded bonds for institutions since 1991. Last year I traded at least 4 separate "Private Placements." If you could find this bond, you could buy it...if you're an accredited investor which means at least 5mm in net worth or over 250k in income over the last two consecutive years. If you're not then you can not buy it. I have institutions that want to buy this issue but they won't until it's below 90. And it will get there. But it will take time. If the stock runs to 30, it'll never be trading there. If the stock wallows at 22 OR LESS then just watch. If you are a retail buyer, trader, investor then you have no experience to work from.