Holders of PXUPA should indeed much prefer that the hybrid can be kicked down the road. Tax considerations aside, it does not matter in the least whether one has paid $100, $35, $10 or $6.70 for them. The "value" of each person's holding is not what one pays, and not the ruling market price, but what one will ultimately receive over and above that market price (however that gets decided), discounted back to the present.
Any offer of conversion whilst the company is still struggling is bound to be at a very steep discount to the $100 or so. There will be plenty of noises emanating from the Board and the RE as to why the deal would be, if not Fair, then at least Reasonable.
Ideally for PPX holders, the offer would be launched when it's "darkest before dawn".
Unless the offer is significantly above the RE 'valuation', I would be rejecting it on the basis that any stabilising of the business (probably due to continued slashing of costs, outright sales of underperforming divisions and perhaps a restructure of the balance sheet) should ultimately lead to an improvement in underlying profits and a sharp upward revision of the true hybrid value.
Even if sales continue to fall steeply, they'll still be huge in relation to a stabilised Paperlinx. Time will then be the friend of this company, much to the regret of those who may have been tempted to an early abandonment.
[PXUPA only]
P.S. The above is just my take on how things may pan out. Do your own research etc.
SRS Price at posting:
5.0¢ Sentiment: None Disclosure: Not Held
