[sidhuk]

some one is converting debt in to stocks. giving up 6% annual interest rate. Blackberry no longer has to pay interest on 300 millions. how is this bad for the Blackberry?

[jake simmons3]

some one is converting debt in to stocks. giving up 6% annual interest rate. Blackberry no longer has to pay interest on 300 millions. how is this bad for the Blackberry?

EXACTLY

[anon(4086547)]

OT - Apple engineer talks about the new Macbook

This is not funny! Because it's true!

[W Hoa]

Some 30M shares have been added to the pool, so shares have been diluted a bit now.
EPS will be negatively impacted. If JC was expecting to break-even, this extra 30M might bring our EPS down to negative

On the other hand...perhaps earnings this quarter will be strong enough that Chen and Prem felt the timing was ok to go ahead with the conversion? Let's see how the news plays out on the market.

[spiller]

No. Positive earnings can't be diluted to negative. Earnings will be diluted by 5%. Not a big deal.

What is more interesting is their rationale and the timing. They are forgoing the convertible income to become equity holders...

Posted via CB10

Here is someone who can do math. Good counter.

[chrysaurora]

No. Positive earnings can't be diluted to negative. Earnings will be diluted by 5%. Not a big deal.

What is more interesting is their rationale and the timing. They are forgoing the convertible income to become equity holders...

Posted via CB10

Haha. *feeling embarrassed*
thanks for the correction.

[morganplus8]

Short answer Yess. I have a feeling Morgan will be here shortly to really dig in and explain why this is great news

Posted via CB10

I'm like the last guy to the party here! Yes, they were paying $ 75 MM in interest annually and it looks like they got a huge break with an $ 18 MM reduction in financing costs. Wouldn't it be nice of all of those shares were converted and we saved more? We all know the stock is going much higher than $ 10.00 in the months and years ahead, come on Prem, do the right thing.

I was away for a few hours, I see the stock tried to trade above $ 10.00, so far, it hasn't even broken $ 9.90/shr ...... when was the last time you saw BBRY not trade in the red at some point during a quiet/newsless day? Now I jinxed it!

[sidhuk]

No. Positive earnings can't be diluted to negative. Earnings will be diluted by 5%. Not a big deal.

What is more interesting is their rationale and the timing. They are forgoing the convertible income to become equity holders...

Posted via CB10

as i understood that bond deal was 5 or 6 years. current share price is around $10.
1. either they need the money?
2. expecting share price to rise?
3???

edit: what would be really great if blackberry purchased these shares on the open market?

[La Emperor]

as i understood that bond deal was 5 or 6 years. current share price is around $10.
1. either they need the money?
2. expecting share price to rise?
3???

Something big from the Secusmart, Samsung , IBM device that will be unveiled this Saturday which could alter the sp significantly.
The IBM involvement is intriguing as we all know who they cater to.

[Munx]

as i understood that bond deal was 5 or 6 years. current share price is around $10.
1. either they need the money?
2. expecting share price to rise?
3???

edit: what would be really great if blackberry purchased these shares on the open market?

Many different reasons. I don't have access to convert pricing but yes as you say trading near parity. Worse case scenario is a sell strategy on the equity side but I don't really see it as a likely scenario.

Timing is odd though...

Posted via CB10

[_dimi_]

''Canso Investment Counsel Ltd. (Canso) rejects “efficient market” theory. Canso believes that the financial markets are subject to human emotion and biases and are thus inherently inefficient.''

This is pretty remarkable, or not? They're now in the same camp as us if something horrible would happen to BlackBerry.. but as bond holders they would have been repaid first? Bond holders receive a 6% annual payment, but also enjoy the upward potential of BBRY.. like us? Why would they do that? Do they need to redeem funds.. or would they be looking to increase the float so short positions can be covered more easily? Just thinking out-of-the-box here.. it sounds a bit far-fetched though

[_dimi_]

Many different reasons. I don't have access to convert pricing but yes as you say trading near parity. Worse case scenario is a sell strategy on the equity side but I don't really see it as a likely scenario.

Timing is odd though...

Posted via CB10

You'd expect the group of bond holders to share Prem's vision.. selling now could mean Canso Investment Counsel Ltd. as a company could be looking for cash, or they haven't done their homework before buying these bonds and now no longer 'believe' in Chen's strategy. The latter is unlikely imho.

[morganplus8]

Here is some quick math on that bond issue. There are currently 525 MM shares outstanding plus bonds, if they earned $ .10/shr that would mean they earned $ 52.5 MM bucks, now if those bonds are converted completely, they would have 650 MM shares outstanding so divide $ 52.5 MM / 650 MM shares and you get $ .08/shr. The earnings hit would be 20% or $ .02/shr to both earnings and a loss. Fully diluted shares would now be an EPS of $ .08/shr and the same goes for losses, they would report a fully diluted loss of only $ .08/shr instead of $ .10/shr with the diluted float. The change is 20% of EPS to the bottom line. That means it is $ .02/shr easier for Chen to report flat earnings next Q!

Now why did they convert those bonds? Great question, I wonder if the report is related to the conversion into stock and the accompaning reduction in the Short Interest in BBRY? I would say those shares were hedged with a short position in the stock. If this is the case, a chunk of the outstanding shares are likely hedged the same way. We just need to see the execution date to find out as we know when the short interest dropped.

[W Hoa]

as i understood that bond deal was 5 or 6 years. current share price is around $10.

November 2020 was the original time frame

[Munx]

You'd expect the group of bond holders to share Prem's vision.. selling now could mean Canso Investment Counsel Ltd. as a company could be looking for cash, or they haven't done their homework before buying these bonds and now no longer 'believe' in Chen's strategy. The latter is unlikely imho.

But if they need cash they just sell the bond...they are now equity holders.

Posted via CB10

[morganplus8]

But if they need cash they just sell the bond...they are now equity holders.

Posted via CB10

I think it is more important to find out if they "unhedged" themselves, as _dimi_ alluded to, they are exposed now and weren't while holding the bonds and short the stock. We dropped about 30 MM shares in the short interest report two sessions ago.

[_dimi_]

But if they need cash they just sell the bond...they are now equity holders.

Posted via CB10

'Just selling' a 300 million dollar bond seems a bit harder than converting shares and selling (part of the shares, perhaps not all) on upward momentum?

[kfh227]

lol how would that be illegal ? Anyone can buy any amount of shares on the open market

Market manipulation laws.

Posted via CB10

[_dimi_]

Hi Morgan,


Good thinking!!! But that still leaves the question: why did they convert the bonds? Not to get exposed... and if they expect shares to rise they could just hold on to their bonds and claim the 6%?

Edit:

I remember reading somewhere that only 'naked' short positions are reported, and that these short positions need to be covered (or off-set against actual shares so it becomes a hedged position, along with some other dodgy ways of finding a way around this law) within a certain amount of weeks/months. So, with this complete speculation from my part in my backmind, were they forced to convert the bonds because they found no other way of off-setting their short position? If only I remembered where I read this...

[Munx]

Here is some quick math on that bond issue. There are currently 525 MM shares outstanding plus bonds, if they earned $ .10/shr that would mean they earned $ 52.5 MM bucks, now if those bonds are converted completely, they would have 650 MM shares outstanding so divide $ 52.5 MM / 650 MM shares and you get $ .08/shr. The earnings hit would be 20% or $ .02/shr to both earnings and a loss. Fully diluted shares would now be an EPS of $ .08/shr and the same goes for losses, they would report a fully diluted loss of only $ .08/shr instead of $ .10/shr with the diluted float. The change is 20% of EPS to the bottom line. That means it is $ .02/shr easier for Chen to report flat earnings next Q!

Now why did they convert those bonds? Great question, I wonder if the report is related to the conversion into stock and the accompaning reduction in the Short Interest in BBRY? I would say those shares were hedged with a short position in the stock. If this is the case, a chunk of the outstanding shares are likely hedged the same way. We just need to see the execution date to find out as we know when the short interest dropped.

Agree with the math and adding for clarity that today's conversion represents a quarter of the outstanding converts...so today's developments are 1/4 of your % figures.

Interesting theory regarding the short hedge but I have my doubts as the short interest remained mostly unchanged or down in the weeks after the debt deal was done. If lenders were short hedging around the deal then we would have seen a corresponding uptick in short interest.

Posted via CB10

[morganplus8]

Hi Morgan,


Good thinking!!! But that still leaves the question: why did they convert the bonds? Not to get exposed... and if they expect shares to rise they could just hold on to their bonds and claim the 6%?

Edit:

I remember reading somewhere that only 'naked' short positions are reported, and that these short positions need to be covered (or off-set against actual shares so it becomes a hedged position, along with some other dodgy ways of finding a way around this law) within a certain amount of weeks/months. So, with this complete speculation from my part in my backmind, were they forced to convert the bonds because they found no other way of off-setting their short position? If only I remembered where I read this...

Its all pure speculation but I now believe they shorted the stock over time and converted the bonds in January/February of this year. We saw a drop of 30 MM shares in the short position a couple of sessions ago to indicate that they were short the stock. Why they would give up the 6% is beyond me unless they are gaining way more than 6% in the open market selling call options and other strategies. We have to look into the dates for the conversion and the huge drop in short interest, they look to be very close together. It isn't difficult to beat 6% as a rate of return on your investment these days.

[morganplus8]

Agree with the math and adding for clarity that today's conversion represents a quarter of the outstanding converts...so today's developments are 1/4 of your % figures.

Interesting theory regarding the short hedge but I have my doubts as the short interest remained mostly unchanged or down in the weeks after the debt deal was done. If lenders were short hedging around the deal then we would have seen a corresponding uptick in short interest.

Posted via CB10

Not so, you would see short interest drop as they remove the hedge and take up stock, short interest plunged in the second half of January/2015:

1/30/2015 97,681,923 16,211,710 6.025393
1/15/2015 125,367,832 21,627,814 5.796602

Read more: BlackBerry Limited (BBRY) Short Interest - NASDAQ.com

That amount would account for a bond conversion in this case, we need to know the date that they called the bonds in for stock.

[_dimi_]

Naked Short — This is an invention of the securities industry that is a license to create counterfeit shares. In the context of this document, a share created that has the effect of increasing the number of shares that are in the market place beyond the number issued by the company, is considered counterfeit. This is not a legal conclusion, since some shares we consider counterfeit are legal based upon today's rules. The alleged justification for naked shorting is to insure an orderly and smooth market, but all too often it is used to create a virtually unlimited supply of counterfeit shares, which leads to widespread stock manipulation – the lynchpin of this massive fraud.
Returning to our example, everything is the same except the part about borrowing the share from someone else's account: There is no borrowed share — instead a new one is created by either the broker dealer or the DTC. Without a borrowed share behind the short sale, a naked short is really a counterfeit share.
Fails–to–Deliver — The process of creating shares via naked shorting creates an obvious imbalance in the market as the sell side is artificially increased with naked short shares or more accurately, counterfeit shares. Time limits are imposed that dictate how long the sold share can be naked. For a stock market investor or trader, that time limit is three days. According to SEC rules, if the broker dealer has not located a share to borrow, they are supposed to take cash in the short account and purchase a share in the open market. This is called a “buy–in,” and it is supposed to maintain the total number of shares in the market place equal to the number of shares the company has issued.
Market makers have special exemptions from the rules: they are allowed to carry a naked short for up to twenty–one trading days before they have to borrow a share. When the share is not borrowed in the allotted time and a buy–in does not occur, and they rarely do, the naked short becomes a fail–to–deliver (of the borrowed share).

Counterfeiting Stock - Explaining illegal naked shorting and stock manipulation

[morganplus8]

Naked Short — This is an invention of the securities industry that is a license to create counterfeit shares. In the context of this document, a share created that has the effect of increasing the number of shares that are in the market place beyond the number issued by the company, is considered counterfeit. This is not a legal conclusion, since some shares we consider counterfeit are legal based upon today's rules. The alleged justification for naked shorting is to insure an orderly and smooth market, but all too often it is used to create a virtually unlimited supply of counterfeit shares, which leads to widespread stock manipulation – the lynchpin of this massive fraud.
Returning to our example, everything is the same except the part about borrowing the share from someone else's account: There is no borrowed share — instead a new one is created by either the broker dealer or the DTC. Without a borrowed share behind the short sale, a naked short is really a counterfeit share.
Fails–to–Deliver — The process of creating shares via naked shorting creates an obvious imbalance in the market as the sell side is artificially increased with naked short shares or more accurately, counterfeit shares. Time limits are imposed that dictate how long the sold share can be naked. For a stock market investor or trader, that time limit is three days. According to SEC rules, if the broker dealer has not located a share to borrow, they are supposed to take cash in the short account and purchase a share in the open market. This is called a “buy–in,” and it is supposed to maintain the total number of shares in the market place equal to the number of shares the company has issued.
Market makers have special exemptions from the rules: they are allowed to carry a naked short for up to twenty–one trading days before they have to borrow a share. When the share is not borrowed in the allotted time and a buy–in does not occur, and they rarely do, the naked short becomes a fail–to–deliver (of the borrowed share).

Counterfeiting Stock - Explaining illegal naked shorting and stock manipulation

Hey brother! I don't think these guys were naked shorting BBRY, that's reserved for criminals like Goldman Sachs, Morgan Stanley etc., ........... I think the whole thing is above board for the bond deal here.

[_dimi_]

Might be watching too much CSI...