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Hey Mike,
I am a bit confused by the example you illustrated for Loan Stock. When defining the PES by chosing the worst position for globle invester, you chose the one which converts to most number of shares. Is that because the more number of shares are converted, the lower EPS will be? Is that why this situation is worst for globe invester? Can you confirm again?
Thanks!Yes, absolutely correct! More shares, then bigger denominator, then lower earnings for a greater number of shares
Thanks Mike. But then comes to another question. If this is the worst positon, why the globle investers want to convert the loan stock to shares at this stage? Shouldn’t they avoid instead? And convert to shares when it is best for them?
But the global investor – our virtual punter – is a person potentially looking to buy shares. he’s not the loan stock holder looking to convert. Additionally, the stock holder will have only specific days / dates on which he can convert the loan stock – only rarely will they have a range of dates for conversion – so it’s hardly a matter of choice
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