For donkeys: What are convertible bonds? I don't have the internet at the moment so I can't google it.
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@DonkeyInvestor Quasi bonds with an option. MSTR continuously issues convertible bonds at almost 0% yield (the last ones were actually 0%), with an option to buy MSTR stock in the future at a fixed price.
Investors then effectively buy a bond with 0% interest + a stock option.
Investors then effectively buy a bond with 0% interest + a stock option.
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@stefan_21 Thought convertible bonds are bonds with a coupon that can be converted into shares on expiry?
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•@meonmonday Exactly, they can, but do not have to be converted :)
So they have the option of converting the bonds into shares (at a fixed price).
For example, if you buy convertible bonds from MSTR for 100 million at 0% interest and the option to convert the bonds into shares at a price of 500€/each, it suddenly makes sense to buy the bond despite the low interest rates - assuming the share price increases.
So they have the option of converting the bonds into shares (at a fixed price).
For example, if you buy convertible bonds from MSTR for 100 million at 0% interest and the option to convert the bonds into shares at a price of 500€/each, it suddenly makes sense to buy the bond despite the low interest rates - assuming the share price increases.
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•@stefan_21 and how much can Allianz buy the shares for in this case?
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•@DonkeyInvestor It depends on exactly which convertible bonds you bought. MSTR issues them all the time. You probably won't be able to find out without a Bloomberg terminal. But if I pick it up somewhere, I'll tell you :)
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@DonkeyInvestor I don't know how many you get per bond, you'd probably have to work out, but the latest ones were probably at 2028 with a call option of around $680. So someone must be very bullish, because the bonds are going out at zero coupon, which is unique for convertible.
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