Don’t listen to those uneducated negative spreading hedges
$Faraday Future Intelligent Electric Inc. (FFIE.US)$ Convertible note @ $5.24
No reason for investor to exercise the conversion since the market price is lower than the conversion price!
Convertible notes allow bondholders to convert debt into equity at a fixed price (in this case, $5.24). If the market price of the stock is lower than $5.24, converting into shares would result in an immediate loss since bondholders could simply buy shares at the lower market price rather than converting the notes.
As long as bondholders hold the convertible notes, they continue to earn interest on their investment. If the stock price stays below the conversion price, bondholders might prefer to keep earning interest until they see the stock price rise above $5.24, making conversion more attractive.
Bondholders might wait for a future rise in FFIE's stock price before converting. If the company improves its financial position or hits strategic milestones, the stock price could eventually exceed the conversion price, making conversion into equity a profitable move at that time.
In some convertible note agreements, there could be provisions allowing for adjustments to the conversion price in certain situations (e.g., stock splits, dividends, or significant stock price drops). However, there’s no indication that FFIE’s specific terms allow for such adjustments.
In summary, unless the stock price rises above $5.24, bondholders would likely hold their convertible notes to avoid converting at a loss.
As long as bondholders hold the convertible notes, they continue to earn interest on their investment. If the stock price stays below the conversion price, bondholders might prefer to keep earning interest until they see the stock price rise above $5.24, making conversion more attractive.
Bondholders might wait for a future rise in FFIE's stock price before converting. If the company improves its financial position or hits strategic milestones, the stock price could eventually exceed the conversion price, making conversion into equity a profitable move at that time.
In some convertible note agreements, there could be provisions allowing for adjustments to the conversion price in certain situations (e.g., stock splits, dividends, or significant stock price drops). However, there’s no indication that FFIE’s specific terms allow for such adjustments.
In summary, unless the stock price rises above $5.24, bondholders would likely hold their convertible notes to avoid converting at a loss.
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70127023 : If investors are interested in investing, why don't they directly invest and buy stocks in the secondary market? After all, the current price is lower than the convertible price. What are the benefits of this approach? Is it because there is no profit in getting up early?
72740946 70127023 : Investors won't be as naive as leeks, buying at such a high price in the secondary market, it's like buying one and getting one free. Why would you spend $5.24 to buy a stock that costs $0.04?