Help Parsing 4% Note Payoff stock conversion terms
Now that we've got a breather from ex-div worries!
As I understand it the current conversion price is $6.76 on principle of $115.6m, amounting to 17.1m shares.
Here's what I believe is the applicable wording from the 4% Note Prospectus (pg 30):
" (6) cash distributions– we pay a dividend or make a distribution consisting exclusively of cash to all or substantially all holders of outstanding shares of common stock, in which event the conversion rate will be adjusted so that the same shall equal the rate determined by multiplying:
i) the conversion rate in effect immediately prior to the close of business on the trading day prior to the ex-dividend trading day for such dividend or distribution by
ii) an adjustment factor equal to a fraction, the numerator of which is the current market price of our common stock, and the denominator of which is the current market price of our common stock, minus the amount per share of such dividend or distribution.
For purposes of this clause (6), the “current market price” of our common stock means the average of the closing sale prices of our common stock for the five consecutive trading days ending on the trading day prior to the ex-dividend trading day for such cash distribution, and the new conversion rate will take effect immediately after the ex-dividend trading day for such distribution. Notwithstanding the foregoing, in cases where (a) the per share amount of such distribution equals or exceeds the current market price of our common stock or (b) the current market price of our common stock exceeds the per share amount of such distribution by less than $1.00, in lieu of the foregoing adjustment, you will receive upon conversion, in addition to shares of our common stock, if any, such distribution you would have received if you had converted your notes immediately prior to the record date for such distribution."
Whoever owns the notes gets to convert a bunch more shares if the price stays this low (or lower) for the 5 days prior to the ex div if I understand the math in clause ii. You're betting and hoping the price goes up before June 1st if you buy here.
What I've never understood is why ENZN management wasted cash to buy back shares at double digit prices just before the activists (value creators) dropped their hammer.
I'm still mulling over the possibilites of the above conversion consequences. The big items that pop up in my mind at the moment are:
1) The payment and ex-div date is now three and four days after the note payoff date of June 1.
So how will that playout? I haven't gone throught the agreement with a fine toothcomb to see if this is covered, but I don't see why it should be. Seems to me conversion price should stay at what it is, but then if there are self serving hands on the levers, who knows.
2) Clearly, had the ex-div date occured this coming Friday, May 3rd, like it might have, and the current pps been used use in the conversion factor modification, it would have been by something like a factor of 2, or going from 17.1m shares to 34m shares. Game over imo.
At the moment this seems not to be about to happen, but the mystery remains, why would the other institutions have stood around with their hands in their pockest and let this happen. Why not challenge the pps manipulation and keep the it up, buy up the dumpers. Clearly someone did this for the $2 deal. Jeezem marroni they've got millions of skin in the game, is no one home, what is going on there?