I do not wish to sound negative about this financing announcement...and I do not have a position at the moment either short of or long...However, I observe that an issue like this does potentially cause some selling pressure on the equity. I say that because IMHO, institutions that subscribe to the convertible notes have an increase in their weighting, so may sell down some of their existing holding. The selling is a fairly short term phenomenon, and may not happen due to the substantial interest by institutions in growing their AED exposure. After the right weighting is again achieved, the selling is likely to subside and AED regain its upward trajectory.
For a live example of what I am saying you can review trading inthe weeks after OXR issued a significant volume of similarly out of the money covertible notes (USD100m from memory) around April 2005. The stock was around $1.04 at the time of the issue and traded down to around $0.82 within a few weeks (in my opinion due to selling from those instos who took up the converts). At the time I held a significant CFD position and was eventually stopped out...very very disappointing as a matter of months later it was trading at $1.20 and didn't really look back.
I'm just saying care may be needed to raise up your stops in this situation.
regards DF
AED Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
