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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Carillion Plc | LSE:CLLN | London | Ordinary Share | GB0007365546 | ORD 50P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 14.20 | - | 0.00 | 00:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
Date | Subject | Author | Discuss |
---|---|---|---|
17/1/2017 10:04 | Convertible bond provides the investors an income by paying them interest. Buying a convertible bond similar to buying a bond with a call option. MRW as an issuer who sells the bonds to raise money with an interest offer to the buyers (the part of bond) and an option to convert the bond for shares in an agreed price at the maturity of the bonds (the part of call option)If the bond holder decided to convert the bonds to shares eventually. The issuer issues more shares or gets shares from the reserve. The bond holders get their shares and the issuer has its debt erased. Happy partners!I believe the shorting operation will be familiar to all the investors on the discussion board. So, no further explanation will be provided. | kcsham | |
17/1/2017 09:44 | Lord Gnome - you are right, if the shorters and the holders of the convertibles are not the same institutions, the operation is not called convertible arbitrage. | kcsham | |
17/1/2017 09:29 | But if the shorters and the holders of the convertibles are not the same institutions, it isn't happening. There is no convertible arbitrage. | lord gnome | |
17/1/2017 09:24 | Therefore, nobody should try to label Convertible Arbitrary as a guaranteed winning strategy in investment. | kcsham | |
17/1/2017 08:59 | Convertible arbitrage involves the simultaneous purchase of convertible bond and the short selling of the same issuer's shares, MRW is the issuer in our case. As I said there is no guaranteed winning formulae in investment or, in fact, in anything in our life. In early 2005 many convertible arbitrageurs suffered losses when the credit of General Motor was downgraded at the same time Kirk Kerkorian was making an offer for GM's stock. Since most arbitrageurs were long GM debt and short the equity, they were hurt on both sides. Going back a lot further, many such "arbs" sustained big losses in the so-called "crash of '87"Some of the risks are listed on the page 6 of the document posted by M4tinu HTTp://www.aima.org/ | kcsham | |
16/1/2017 14:50 | RCTurner, We are talking at slightly crossed purposes. Yes, I agree the shorters have made money. I was actually referring to the company itself which I still belive could have a good future for its shareholders. | jaf1948 | |
16/1/2017 14:07 | I suppose the question is: when will the shorters take their profit? Sometime before Dec 2019 :) | m4rtinu | |
16/1/2017 12:20 | their profit so far is of the order of £80m | rcturner2 | |
16/1/2017 12:19 | er, the price has gone from over 350p to under 250p while they have shorted it they are well in the money | rcturner2 | |
16/1/2017 11:43 | As long as the company is able to continue to pay dividends at the current level the shorters have not been proved right. | spoole5 | |
16/1/2017 10:19 | RCTurner2 'The shorters have been proved right.' Not yet ! | jaf1948 | |
16/1/2017 09:02 | Good exchange of views here. Sorry to post this link again, but scroll down to 2nd to last page. There is a bar chart showing an example of Convertible Arbitrage. In this example, the cost of the shorting is small relative to other profit made in the deal. I haven't checked all the details to see how close it is to CLLN situation, but it shows that the cost of the dividend on the borrowed shares need not be a deterrent. Cheers MU | m4rtinu | |
16/1/2017 08:11 | The shorters have been proved right. | rcturner2 | |
14/1/2017 16:47 | Eventually the shorters will either be defeated or proved right though. The company will either carry on chugging along with modest growth and a decent dividend increasing year on year or have to cut the dividend or raise capital to get the debt under control. | spoole5 | |
14/1/2017 14:16 | Poacher45 spot on. I have said for months that this share price is manipulated but have been criticised by other posters. It is obvious. If the shorters are so clever as some here seem to think then whatever they knew 18 months ago would have surfaced by now. The share price is so low because of them and the negative smear that their position gives the company. | lab305 | |
14/1/2017 09:49 | At the beginning of December UBS which had a price target of 230p buys a load of shares at a higher price than 230p. The share price was 256p the day before the update. We are nearly all agreed the update was good. Not so for UBS it immediately sells all its shares and cuts the target price to 195p. Deutsche bank joins in and they succeed in making everybody think this must have been a terrible update and the price sinks to 230p. They have put doubts in peoples minds and in my opinion manipulated the share price for there own ends. Once again I must state this is only my opinion. | poacher45 | |
14/1/2017 09:49 | I tend to agree with Gnome, but I have no evidence of who is or is not shorting. But I thought convertible arbitrage was really a hedge fund activity - it's quite a complicated strategy to actually implement. So are "the institutions" really being hedge funds, are they being that sophisticated? Or was 2.5% really an acceptable interest rate? Answers on a small postcard... | edmundshaw | |
13/1/2017 23:07 | We seem to go round in circles time and again with this issue. We have convertibles, fact, which are currently well out of the money. We also have high levels of shorting, fact, which must correct sooner or later (opinion). I don't, and never have bought, the arbitrage argument. The convertible holders and the shorters are not the same institutions. At present the shorters have the company share price by the balls. If you think the company is safe and strong, however and that the shorters are wrong, then at this price, the shares are a gift. I have a full allocation of CLLN which I hold for the growing dividend. I have no fears for my investment. I am annoyed that institutions have lent stock to the shorters. My annoyance is somewhat mollified by the fact that the shorters must pay the dividends due to the institutions from whom they have borrowed stock. One argument for going short is the pension deficit. In my view this is an artificial actuarial creation which is nothing more than a reflection of the current low interest rates. Once rates (and therefore gilt yields) start to rise, some if not most of the deficit will evaporate. That is my belief. We have an excellent company at an absurdly low valuation and offering a safe above average yield. Buy and hold and all will be well. | lord gnome | |
13/1/2017 22:00 | Interesting scenarios, but when I asked the question of senior management, I was told that the holders of the convertibles are not the US Hedge Funds who are shorting the stock. I have no reason to believe that I was not told the truth. The Company must know who owns the convertibles by reference to the share register. | redartbmud | |
13/1/2017 21:34 | He said "kind of short for free". What that means is they short as a hedge such that they win whether the price goes up or down (mostly). The "kind of" is that on average they will make less profit (though with supposedly less risk). Costs aside it is still roughly a zero sum game (though see below), so in that sense you are right and it is not free. But if you are big enough to buy convertibles at scale and then concurrently short the underlying stock, the idea is that in most scenarios (i.e. except a small price window or the other party going to the wall) it is generally a guaranteed profit. And in maintaining a market neutral position (the standard if rather unimaginitive policy where you don't care much which way the price to moves), that profit can actually be improved when there is price volatility in the stock (by delta hedging). It can go very wrong if there are serious market downturns, as delta hedging gets tricky (the second order derivative of the equation for the change in value of the option gets too big to ignore and difficult to manage) and also occasionally the "logical" relative pricing of the convertibles and stock can break down. The dark side of it is that profits normally increase as the share price drops (as the short gain outweighs the underlying convertible bond value decline). Which is where I worry a bit: can the arbitrageurs manipulate stock declines in ways I do not understand?? | edmundshaw | |
13/1/2017 19:22 | RC - Your comment: 'The holders of the bonds can kind of short for free if they think the price will fall, since in any price raise they get the rise in value of the bonds.'I don't really know what to say. There is nothing for free in this world, just forget it. Shorters need to pay an interest on the money that they loan to cover the cost of their operation - shorting. Of course if the shorters believe a particular share will go down in price, they short the share and the price of the share does fall more than enough to cover their cost, they make a profit There is nothing different from what will happen to normal investors. If you buy it low and sell it high, you make a profit. If you want to short any share, you may open a spread betting or a CFD account that provides you this facility to short shares. This may help you to understand how this operation works. However, my statement is only for discussion purposes and it is not a recommendation for you to carry it out at all. | kcsham | |
13/1/2017 18:04 | The convertibles may well be part or even all of the shorting. People have lent money to CLLN at 2% interest with a conversion price of 399p, which is never going to happen, so the company will be paying cash not shares. The holders of the bonds can kind of short for free if they think the price will fall, since in any price raise they get the rise in value of the bonds. So I suspect that this is a bit of a free lunch for hedge funds. They loan the money and short the stock, they really only lose if the share end up at somewhere close to the 399p, but I suspect that is never going to happen either. | rcturner2 | |
13/1/2017 17:31 | edmund, Are you therefore saying that the convertibles are nothing to do with the large shorting of CLLN stock ? If so, what do you think the root cause is ? | jaf1948 | |
13/1/2017 16:18 | Oh, the convertibles. I already know about them. It is the company that has the option of repaying the debt in cash or new shares. Convertible arbitrage I understood at one point quite well (I have not looked at them recently), it is a kind of hedge based on the conversion option that guarantees to make money in MOST outcomes (not all) and reduce losses in others. The downside is that (i) you have to pay for shorts and (ii) you reduce your potential gain. There is no free lunch after all - at least not with convertible arbitrage. The convertibles covered around 10% of the shares at issue, so there could be dilution if the company decided to issue new shares on expiry (2019). But all this is old, known information. | edmundshaw | |
13/1/2017 13:28 | From the Times Shares in its FTSE 250 parent company have fallen by more than a fifth over the past 12 months, rewarding short-sellers that have bet against the company. There are 16 investors holding a combined 21.26 per cent short position, according to regulatory figures. This is to do with the 170,000,000 loan stock which I think is do to be repaid in 2019. The investors are only being paid 3%. So why have the institutions lent them the money? Because Carillion gave them a sweetener. It could be considered a call option if the share price goes above £3.95 they still can covert this loan stock for an ordinary share at £3.95. However at the moment with the share price standing at £2.35 it has to be considered a put option because if the loan stock was repaid today the investors could buy new shares for £2.35. This is my understanding of the situation. | poacher45 |
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