I think you could be on to something here. You'd be crazy to be selling out at these levels with such upside and it does seem based on my experience that one broker is perhaps buying and selling to themselves (not shorting) just to keep the price range bound. Please read the following explanation as a further exploration of your initiating comment. Good luck by the way, I've got a million locked in and I'm not going anywhere lol...
Why Do Companies Issue Convertible Bonds? Companies issue convertible bonds or debentures for two main reasons:
To lower the coupon rate on debt – Investors will generally accept a lower coupon rate on a convertible bond, compared with the coupon rate on an otherwise identical regular bond, because of its conversion feature. This enables the issuer to save on interest expense, which can be substantial in the case of a large bond issue. For example, Intel (Nasdaq:INTL) issued $1.6 billion of convertible debentures in December 2005 with a coupon rate of 2.95%, maturing in December 2035. The chip giant notes in its 2012 annual report that the effective interest rate – which is the rate for a similar instrument that does not have a conversion feature – is 6.45%. The convertible debenture therefore saves Intel $56 million in annual interest expense, or a staggering $1.68 billion over the debenture’s 30-year life.
To delay dilution: Raising capital through issuing convertible bonds rather than equity allows the issuer to delay dilution to its equity holders. A company may be in a situation where it prefers to issue a debt security in the medium term (partly since interest expense is tax-deductible), but is comfortable with dilution over the longer term because it expects its net income and share price to have grown substantially over this time frame. In this case, it can force conversion at the higher share price (assuming the stock has indeed risen past that level).
GUF Price at posting:
9.2¢ Sentiment: LT Buy Disclosure: Held
