on CV issuance, holders short the stock, with the borrow from the company/issuer itself if investors can't find the borrow, so it isn't naked shorting. The CV deal only closed when investors had shares to short, this is par for the course. This isn't news, this was actually reported as the case when the CV deal closed that the banker got shares for investors to short (with borrow from issuer itself). With a sizeable deal like this, only company can get the shares for investors to short.
I doubt they actually short the stock. They most likely holding put.
Naked short on daily basis is possible, long time holding is hard, since SEC now start to enforce SHO.
Thanks for the insight. My broker bought me way too much of these bonds. And now he paints the scenario as an all or nothing proposition as far as them paying off. I am going to keep them and hope for $.50.
assuming we are talking about convertible debt, there is no specific collateral behind them. As for bond holders claims, the CV holders are really low in the totem pole. The company even has to pay off the payables first before CV holders have any claim, if any, on the company assets.
The most likely scenario I think is the company will ask the debt holders to take a steep haircut or they get nothing at all. This is not unlike the Greek situation where banks got forced to write down their debt. Replace Greece with STP, and bond holders might get $0.50 on the dollar. I seriously doubt Chinese govt will bail out bondholders in full on behalf of STP. And anyone holding the CVs in the beginning were probably hedged with mega shorts to begin with so that punished the stock as well from the get go.
But with the latest horror news STP has no remaining value as it cannot pay the due debt in March 2013, it's bankrupt. So it could be acquired from China's Banks in a debt/equity swap and afterwards sold to one of the other Chinese solar companies that would make complete sense for China in my opinion.
Curious how you come up with the "no value" scenario. I own the bonds and am obviously scarred shatless. I have called everyone I know in the bond trading world and nobody seems to have a handle on the recovery rate in what seems like an inevitable chapter 11. I can't even get a handle on how bankruptcy works in China. I assume the bondholders would have some say in the matter. A lot of hedge funds own the bonds. I think its Oaktree capital that owns something like 30%. Any insight would be greatly appreaciated.
I will never mess with a chinese company again.