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Calpine Corp. Message Board

  • DMerril DMerril Mar 21, 2002 8:39 PM Flag

    some misinfo on converts flyin around

    first of all, the converts on the last bond issue are ALWAYS convertible at the holders option - if they somehow decided that hell the stock is really worth %18.07 and the market is just wrong, they can send in the certificates and get stock back tomorrow if they want to

    but they dont have to convert until the bond comes due in dec 05, whereupon if they do not convert they can be paid cash or cash and stock or just stock at the option of CPN

    they can also elect to put the bonds to cpn if a change of control occurs or one year early in dec 04 - again, cpn can elect at its discretion to pay just cash, cash and stock, or just stock, BUT cpn has to use current market value on any stock used if bonds are put (vs. converted) to them

    so if stock is worth more than $18.07, does the holder turn it in or just sit on it and collect a 4% coupon(dividend) - the answer in almost any scenario is sit on it and collect the free interest - the bond would be trading with the equity value priced into it so if for example the stock traded at $36, you can rest assured that the bond would trade around 200% of face since it is really worth that

    the extra "float" represented by the convert does not yet "exist" - it is not currently outstanding shares and it only would cover holders of the bonds, not naked shorts - for now, only 310mm (+/-) shares really exist and we now know that 89mm of those are short, meaning that the difference or about 220mm are left outstanding since all short positions are backed up by borrowed shares and those cannot be used "twice"

    until the share price breaks $18.07 this sets up an unphuqing believable short squeeze imo

    regards, dmc

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