I have warned about this for some considerable time of the danger of raising funds from hedge funds with convertible notes and it looks like they are going in for the kill now.
They will be privy to the company's financial performance and if they believe there is no possibility of raising further funds they will go for the jugular.
The original $100 million from CVI investment had a floor price of $1.68 but it does not mean they will stop shorting at that level as they can short circa 60 million shares with a gauranteed stop loss of $1.68.
The other hedge funds owning the $400 million of convertible notes at a conversion price of $9 have little or no chance of getting their money back on conversion so there only hope is to short the shares.
If they are targetting a 50 cent return on each transaction they need to short over 1 billion shares
They could take a view that the lower the share price the less likely it is for anyone to lend Zip further funds and simply choose to short it into oblivion.
With hedge funds holding $500 million of convertible notes what investor in their right mind is going to invest further funds into Zip
#BnplGoingToZero, page-244
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$2.11 |
Change
-0.035(1.64%) |
Mkt cap ! $2.607B | |||
| Open | High | Low | Value | Volume |
| $2.05 | $2.14 | $2.00 | $14.94M | 7.233M |
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| No. | Vol. | Price($) |
|---|---|---|
| 27 | 129488 | $2.10 |
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| Price($) | Vol. | No. |
|---|---|---|
| $2.11 | 72033 | 25 |
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