redbeard20000

E*Trade: Very Undervalued

Again, go look up the definition of a convertible bond, as well as some examples of how they are processed.

This is where you are confused

"If you need to establish a ratio , why not do it with the exchange , i. e., exchange 1034 notes for 1000 debentures?"

It because it acts as both a debt security and potential equity. Lets use an example with numbers that are clearer:

Stock ABC is trading at 20$ per share and they decide to issue 1$ Billion in convertible debt. So they issue 1 Billion in face par of notes, with a conversion price of 20$. This means the holder of the bond, can either A.) Collect 1$Billion in cash payment at the end of the period, or B.) exchange their notes for 50 million shares. They would have to trade in 20$ worth of notes to get one share. Notice how this is exactly what Citadel is doing, they are trading in 1.034$ worth of notes to get 1 share.

This is why they need to state a "conversion price", thats the lingo used. The notes can either be exchanged for face value, or converted into stock at a set ratio, the conversion price.

As for whether they