Does anybody here have a take on the arbitrage play regarding the upcoming debt for equity swap? Are the biggies shorting into the conversion, or is Ken locking those shares away? Being a contrarian what will spark an enormous short squeeze with so many shares short?
Notice in the fine print how even if the shareholder rights protection is voted down, it aint binding? This board is so anti-Layton, but the street likes the debt reduction and when all the dust settles those pluses may far outweigh the dilution. Or does somebody swoop in and take it out on the cheap?
Prior to the debt exchange but after the public offering of shares, Citadel owned roughly 210 million shares of the company. It has tendered roughly $1.23 billion of debt it holds for the convertible debentures. Now there are two classes of converts but most of the debt that Citadel will acquire is for converts that convert at $1.034. Each Class A debenture thus converts to 967 shares ($1000 divided by 1.034) so they have 1.23 billion in bonds that convert, if exercised, to almost another 1.12 billion shares. If the company at the end of all this has the potential for about 3.5 billion shares outstanding, Citadel has, if it converts, almost 1.5 billion shares or roughly 40% of the company. But it will not convert fully because if it converts to having share ownership of 24.9% or higher, it becomes by virtue of shares owned, a bank holding company and as a hedge fund it has no desire to do so. That is why debt is being exchanged for convertible bonds not equity.
first, yes, those who have the right to convert at $1.05 have probably shorted a signficant # of shares at $1.40-$1.50 to lock in their profits. Can the company be taken over near term? NO!!!!!Citadel's holdings when you figure in the converts are over 25% of the total shares outstanding. No one can take this puppy over while Citadel holds such control and they would not vote for the sale at these prices given the cost basis they have which is way above current market. Now as to a short squeeze, I would think the major longs need to await a very positive earnings report for the next quarter or two and then tell the brokers, put the shares in my cash account (meaning they cannot be borrowed) and then with the SEC on the warpath about naked shorting, the fun and games begin, it ain't just weed, the reefer