Did anyone notice that despite a bad day for Ford on both the news and the share price the 6.5% cumulative convertible notes jumped 4.3% on roughly 9 times the normal volume? Somebody obviously thinks the company is a survivor. Any thoughts on this counterintuitive move?
The conversion, I still believe, is dilutive. New shares will have to be issued to fulfill the terms. The analyst at Deutsche Bank apparently thinks this is the case (http://www.streetinsider.com/Analyst+Comments/Deutshce+Bank+Comments+on+Ford+(F)+As+Company+Commences+Conversion+Offer/2598363.html).
And I continue to see absolutely no reason for anyone holding the 6.5% covertible to accept what seems a very unappealing offer--unless there is something else that will happen to make it significantly sweeter.
Makes sense. I'm sure you are right that they wouldn't/couldn't issue convertibles if they didn't have the shares available. So if the shares are available, it really wouldn't cause any dilution, would it? In the financials they normally state revenue/income in per share amounts both diluted and undiluted. So the diluted amount shouldn't change if the shares are already authorized.
Would the conversion plan then require the issuance of new shares that would have to be approved by current shareholders? Or are there shares authorized but not issued that would be available?
I bought these several years ago at Approx. $50.00 each.
This was going to be interest I would be recieving in retirement. If I include the interest rec'd minus what I lose on the notes, I am still up $2000. Is it better to sell now and place the money into something else or to convert into ford shares or just to hold? Thanks for your thoughts.
If this is money you need in retirement, I cast a strong vote against converting to F common stock....way too risky for my tastes.
So - the decision is whether to stay as-is, or sell and go elsewhere. Your current yield is a bit better than 8% at today's prices. You can find safer preferreds that are well-rated that will bring between 7 - 7.5%.
None of us know what will happen to the company in the future. If it goes BK, you will lose most - or all - of your capital. If it is bought out or taken private, they might be required to redeem these shares at par.
I believe I would explore the tax angle on dealing with losses. You can take the first $3,000 of losses as a direct deduction against earned income each year.
You might consider selling enough of your shares each year to establish the $3000 tax loss.
Everone's situation is different...we can't tell you what to do without knowing more about your earned income and any capital gains that you might have each year.
Hope this is helpful...you should talk to your tax advisor for accurate information.
FYI Gratianus -
Todays 4+% jump in the market value of the convertibles is simply the market adjusting to the premium offered from Ford.
It certainly does not imply that investors think Ford is better off than the day before.
At the time I posted my question Ford had not published its conversion offer, so I'm still trying to digest it. If the price has adjusted to what we holders of the 6.5% converts are being offered, then the value attributed to the Ford common should be something in the range of $9.31 ($9.31*2.8249)+$14.25=$40.55. I'm not sure how Ford can get its share price to that point given the dilutive effect of any conversion. I mean, there are 100 million of these notes, which means that Ford intends to create 435.5 million new shares. Given that Ford currently has 1.88 billion shares outstanding that is quite a pop in dilution. I'm sure I'm not bright enough to understand how this is going to be pulled off, but it sure is interesting.
By the way, how did this board deteriorate into such a bunch of namecalling and political backbiting?
I own about thirty-five stocks....I visit all of their boards, and this one is like a kindergarten compared to the rest of them. Is this somehow UAW related?