- This topic has 5 replies, 2 voices, and was last updated 5 years ago by
.
- Posts
I have a qs in part b in advantages it says directors are also subscribed to convertible loan notes how will the shareholders be concerned with this ?
How will the shareholders be concerned if the rate on the convertible loan notes is same as straight bonds ?
How will the shareholders be concerned is bond holders have option to redeem is share price of company falls ? How are the financial results of tippletine is affected if share price is low
Please explain these points making them.simple to understand many thanks
Convertible bonds normally pay lower interest because investors have the potential to benefit from being able to convert. Here they will be paying the same interest as on straight debt which is unusual and concerning.
If the share price falls below $1.50 then the holders of the convertibles can force the company to repay them in cash. It could be a problem for the company to find the cash – especially if it is doing badly.
The most likely reason for the share price to fall would be that the company was doing badly. (Not the other way round – it is not the change in the share price that affects the profits. It is a change in the profits that affects the share price.)
Thanku so much for explanation please also explain my first question that if directors of the company has also subscribed to covertible bonds how will the shareholder be concerned as directors have 40% of ownership in the company as given in question
That is a minor point – the main discussion is about the directors suggestion in general.
The point the examiner is making in his answer is that if the directors chose to convert earlier than other shareholders then it gives them a bigger shareholding. However this again is a very minor point.
- The topic ‘Tippletine co march/june 2018’ is closed to new replies.