Igor Novgorodtsev's  Instablog

Jet Blue is down over 7% today on heavy volume. The catalyst for this move is not bad publicity from a pilot's "medical" episode two days ago. Lufthansa, which currently holds 15.9% of Jet Blue, is planning to issue convertible bonds where the "kicker" is its Jet Blue stake:

According to WSJ:

"Deutsche Lufthansa AG (LHA.XE) said Thursday unit Lufthansa Malta Blues LP is planning to issue bonds maturing in 2017 which can be converted into up to 46.7 million JetBlue Airways Corp. (JBLU) shares. "

Doing a quick calculation:

282.07 JBLU shares outstanding, 46.7 possible dilution in case of a conversion amounts to around 16%.

Therefore, Lufthansa is essentially planning to sell a covered call on JBLU with an exercise date around 2017 (just a guess since no details are available yet).

There are possible explanations: it needs money it can't easily raise with its Debt/Equity at 2.5, it doesn't think JBLU will appreciate much over next 5 years.

Stay tuned. But my guess it's a former since the bonds will be privately placed.

Disclosure: I am long JBLU.

Additional disclosure: I'm also short JBLU call options.

Since I published "An Epic Australian Bust" article 10 days ago, a few eye-catching economic reports came out that certainly strengthened my thesis (courtesy of FXstreet.com):

Construction work done (Q4) - February 29:

Actual: -4.6% Cons.: -1.0% Previous: 11.7%

Private Capital Expenditure (Q4) - March 1:

Actual: -0.3% Cons.: 3.2% Previous: 14.6%

Company Gross Operating Profits (Q4) - March 5:

Actual: -6.5% Cons.: 0.0% Previous: 4.7%

GDP (Q4) - March 7:

Actual: 0.4% Cons.: 0.8% Previous: 0.8%

Employment Change (Q4) - March 7:

Actual: -15.4K Cons.: 5.0K Previous: 48.2K

And just a few hours ago...

Trade Balance (Jan):

Actual: -0.673B Cons.: 1.530B Previous: 1.325B

These misses are not exactly round-off errors...

Disclosure: I am short EWA.