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"Risk comes from not knowing what you're doing" Warren Buffett I look and sift the world for such misplaced bets. When I occasionally find one, I first exploit it for profit. Then, I write about it for anyone else interested in such ideas. Twitter: @unemon1 Scribd:... More
  • Usec Inc. - Some Additional Tables  0 comments
    Dec 17, 2013 1:19 PM | about stocks: LEU

    As shown in the previous Instantblog, the PPS implied by the current CB can be described with the used of just two variables:

    1. Expected Trading Price of the New Bond (as % of Face Value)
    2. Trading Price of Current $540m CB (as % of Face Value)

    For Example:

    If the $540m CB is currently trading at 30% … and you expect the new issued bond after the reorganization to be trading at 50% ….

    … then the Value of the Equity owned by all Current shareholders after the Reorganization is currently Valued (by the Bond Market) at $3.92m

    … based on the 4.9m common shares outstanding, it translated to a PPS of approximately $0.80

    … Since USU is currently trading at $3.50 … if follows that the PPS is overvalued by approximately 337% (with respect to the price Implied by the Bond Market)!

    1. In this case, you are better off … buying the CB bond … instead of the common shares.
    Stocks: LEU
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