Post by lookingforatenbagger on Oct 30, 2023 2:09:47 GMT
Seriously, why do you do this? If you have a reasonable explanation to the question being explored, we're all ears. But if you don't understand the nature of the puzzle presented by the levels where the bond is trading, and why it's important, then why snipe from the peanut gallery? So, to recap, we're wondering why a non rated convertible instrument, with little to no equity value, is trading close to par. You may not agree with Bill's conclusion. So if that's the case, what's yours? if you think it's pointless to acknowledge the outlier, and offer a possible explanation, then ok, that's your view. If you don't recognize the TRACE prints as outliers in and of themselves, then that puts your comments into perspective.
If you have you realize something very quickly, the Vegas lines are uncanny with their accuracy. In a game where the spread tells you one team would have to get a safety or the other team miss a field goal for that spread to make sense, guess what happens.
So conspiracy theories say it’s all rigged, that’s just lazy thinking. It’s not rigged at all. But when there are millions of dollars at stake really smart people figure out how to find an edge and make an expected value proposition accordingly.
Once upon a time DARPA considered opening a sports book like exchange for wagers on terrorist activity. What group, what location, what weapon. They counted on two things, really smart people would slice and dice the probabilities, and insiders with actual knowledge would attempt to cash in and profit from what they know or heard. Money sharpens the senses. Eventually they deemed it to unsightly and shut it down, but the premise was valid.
Lazy thinking says some entity just invested $17m into Opko stock worth a third of that amount for reasons only known to them. Critical thinking says that they know something I don’t, and I’m about to either win or lose and I didn’t even realize the game had started.
If this is all too time consuming by all means say so. I would rather waste my time trying to figure out the missing details with luxetvox directly than to boor all of you with my random musings.
That said, this thread has taken a turn that appears to be way over the TOS line of civil exchange. Let's return to the real original statement raised by luxetvox "...the equity component of the convert is, shall we say, way out of the $. OTOH, as a debt instrument, the yield to maturity of the 4.5% due 2/25 at ~$97 is 6.80%. Hardly a bargain for a non-rated security, w/a $ losing business. And the 1yr T-bill=5.40%"
This was commented on by wsucougerbill, "I have spent the last 24 hours trying to make sense out of this bond trade, my conclusion is that like most everything connected with Opko it makes absolutely no sense. Dumbest trade I have ever seen and a sure fire way to lose 60%, and the bond market values preservation of capital above yield.
When these bonds come due in 2025 the company has the option to either pay them off in cash or stock. The stock would be valued at $4.22 a share, regardless of the current market price. So in today’s terms you would get paid off with let’s say round numbers, 4m shares of valuable Opko stock, current market value $5.4m ... So congrats you just turned $17m into $5.4m."
LFTB: The answer is simple. If the notes are held to maturity [LFTB: or perhaps sooner, see below] they will be redeemed for cash as explained in the 2Q23 10Q:
"On or after November 15, 2024, until the close of business on the business day immediately preceding the maturity date, [2/15/25] holders of the 2025 Notes may convert their notes at any time, regardless of the foregoing conditions. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our Common Stock, or a combination of cash and shares of our Common Stock, at our election.
LFTB: From 11/15/24 till 2/14/25 Holder of the notes can convert and OPKO will decide how to pay
"We may redeem for cash any or all of the 2025 Notes, at our option, if the last reported sale price of our Common Stock has been at least 130% of the then current conversion price for the notes for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2025 Notes."
LFTB: On 2/15/23 the notes will be redeemed for cash (assuming OPKO has the cash). This leaves luxetvox's question, "Why buy Opko's notes currently selling at close to the market for much "better" companies. Again we look at the 2Q23 10Q:
From the 2Q23 10Q: "If we undergo a fundamental change, as defined in the indenture governing the 2025 Notes, prior to the maturity date of the 2025 Notes, holders may require us to repurchase for cash all or any portion of their notes at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date."
LFTB: I assume something like selling BRL is a "fundamental change." Should that occur on say January 1st, 2024, the note holder would get paid in full after only own the note for a few months.
Earlier wsucougerbill noted, "Almost zero chance ModeX didn’t have an anti dilution clause, so if they convert these guys at a $1, they are going to immediately have to issue more stock to them to level up.
Long story short you now know why the shares have cratered from $2.12 unabated. We have gangrene in our left leg, it needs to be amputated before our predators can devour us, and we are unwilling to do so."
LFTB: I agree Drs Zerhouni and Nabel must have seen this coming.and protected themselves. I think the reason Dr. Zerhouni was put in charge of BRL was to clean it up for sale. I am surprised it has take this long. My guess is the delay in FDA approval set the sale behind. If Luxetvox's valuation of BRL's worth of between $1/2B and $3/4B is correct,
Neither wsucougerbill's or my bond sale thoughts explain the current $1.23 [corrected] share price. Perhaps they are unrelated. Luxetvox often comments on OPKO's lack of institutional support, noting Opko's largest ownership is from index funds. When the market is shaky with more money leaving than entering these funds it effects Opko.
If the tone of this thread's conversation is an indication, retail users are sitting on their wallets waiting for the 3Q23 10Q and CC. I don't expect the consensus estimate of -$0.09 per share will be met.
