Say the CN holder waits 90 days to convert as they get a 10% discount on VWAP.
They would most likely prefer a higher SP than lower SP as 10% equates to more actual returns.
If SP is 3c for instance after 3 months = 2.7c conversion price & they can possibly make 0.3c. About 300M shares x 0.3c = $900k profit. Whereas say at 4c SP = 3.6c conversion thus 0.4c x 300M = $1.2M profit.
The higher the SP the more profit for CN holder to convert & flip.
There were about 300M options available for conversion late 2020/early 2021 & 1B SOI at the time = 30%. About 250M were converted = 25% of SOI & suppressed SP for 3-4 months at the time.
From the announcement:
For illustrative purposes only, on the basis of the 30 day VWAP ending on 28 July 2022, the conversion price would be equal to $0.02109 and assuming the maximum interest is payable and fully converted a maximum of 297,427,386 shares would be issued on conversion.
Therefore, 297,427,386 x 2.109c = $6,272,743 per $5M CN.
If CN holder converts when VWAP 3c at 2.7c = 232,323,814 new shares & when VWAP 4c at 3.6c = 174,242,861 new shares.
Hopefully they convert around the 4-5c range & equates to about 300M new shares / 2,645M SOI = 11.34% which is a lot less than the 25% options converted late 2020/early 2021.
Average daily volume is currently 5M so will take at least 60 days to flip 300M shares. Shouldn't be as bad as late 2020/early 2021.
Good idea to keep an eye on aftermarket announcements for CN conversions. Then we can see if there is a pattern of conversion prior to news.
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