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Cypress Semiconductor Corporation Message Board

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  • floppy_6 floppy_6 Jan 31, 2006 5:58 PM Flag

    How to value CY - keep the debt in mind

    All these discussion may just be useless, keep in mind - it only helps you understand the underneath value, but may not be so useful in real trading.

    1) Any CURRENT SPWR stock price may have no correlationship to its SIMUTANEOUS CY price. Useless to count your CURRENT chips till you walk to the cashier. When we will walk to cashier window? Stock dividend? no way! T. J. is not going to give you one, he treats SPWR as his subsidiary. T. J. may do secondary offering, but it will not happen till August. Even secondary offering is not equal to "cash out" from "cashier". It only increases your credit at cashier window.

    2) Would institutional holders realize the intrinsic SPWR value and start to pump CY next week? No! Since you can't cash it at cashier window yet, why should he count that as real money?

    3) $600 whopping millions convertible bonds excersible at $18.13. If fully converted, that's 33 millions shares. This is serious roadblock to keep the stock form moving higher. Once the stock crosses $18.13, bond holders will do all kinda of tricks to make sure his profit is locked. The tricks include shorts, options all designed to cast pressure on stock.

    So, don't be surprised if one day SPWR moves up 3 bucks, but CY stalls at one single spot.

    Good luck.

    P. S. CY actually moves more in tandem with MU than SPWR. But MU moved only $1 since last low, CY moved almost $3. So SPWR still has some sort of contribution.

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    • Also, with SPWR's lofty price, don't assume that you are buying "core" CY for free. Because SPWR stock price is not only a moving target, it can't be shot down now.

    • P. 80 of 2004 annual report:

      "Each note, ... is sconvertible into 55.172 shares of the Company's common stock...plus a cash payment of $300."

      OK (1000 - 300)/55.172 = conversion price of $12.69 per share.

      The company has the option to tender the $300 in stock at the same conversion price, but has stated its intention to tender cash.

      The debt can and probably will be liquidated on June 30.

      One conclusion: The barrier to moving higher was $12.69. The hedging - reflected in the short interest - has probably already occurred.

      The interesting question is how CY will finance the $180M cash outlay to retire the bonds.

      floppy, I enjoy your contributions. You're one of the reasons this board has improved significantly in the last several months. Thank you and keep posting!

      Simple Simon

      • 1 Reply to simple_simon_sez
      • Simon,

        Hmmmmmmm! You might be right. Actually I am quite confused now. I got that $18.13 figure from Jeffrey's 44-pages long report. I can't paste here, I try to write it here as much as I can:

        The convertible are due 6/08. Prior to maturity date, at the right of each note holders (in $1000 denomination) is convertible into 55.172 shares of Cypress stock (conversion price of $18.13), PLUS a cash payment of $300. Cypress has the option to satisfy the $300 cash payment by issuing the stock if stock price exceeds $11.65. Assuming fully-converted, new shares will be 33.1 millions and cash payment of $180 millions. The cash payment can be paid in stock if stock price exceeds $11.25, equal to roughly 13 millions shares at current price.

        CY has the right before 6/20/06 to terminate the conversion right by paying 3 years of interest payments, assuming its stock price exceeeds $21.75 20 out of 30 consecutive trading days. After 6/20/06, Cy has the right to redeem some or all of the notes without a pre-payment penalty.

        Well, it seem that you are right, since 55.172 x 18.13 = $1000, if PLUS $300. Noteholders will receive more than they are entitled.

        I try to go back to 2003 to search, I can't find the news about the original notes. But since there is a strange amount of 21 millions shares shorted. I think you are most likely be right on this case.

        If so, kiss my self-imposed psychological $18.13 barrier good-bye.

        Thanks Simon indeed.

    • read Simply_Simon's post. I think he is right, Jeffrey's report was wrong.

 
CY
15.26+0.44(+2.97%)Jan 23 4:00 PMEST

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