VNStockNews.com - Until this moment, when the stock prices continued falling lower than the level predicted previously by many domestic investors, including professional institutional investors, the market has seen clearly the advantages of issuing and investing in convertible bonds, once quite popular a year ago.
On the day August 27, 2010, 1.8 million shares of convertible bonds of Chuong Duong JSC issued to strategic partners were freely traded after the six- month restriction on bond transfer.
Two partners who bought CDC shares of this phase was Rubber Finance JSC, with 1.2 million shares and Thang Long Securities JSC (TLS), with 600,000 shares at 25,000 dong per share. This price was considered quite good at the time of release because it was much lower than the market price, and Chuong Duong JSC said that this preference was only for the strategic investors of the CDC.
On August 27, CDC stock price was 27,100 dong per share and then was descending until November 26 to stay at 21,000 dong per share. If calculated according to the purchase price, these strategic shareholders suffered more than 25 percent loss, while if including the cost of capital (for loans) or opportunity cost with an interest rate of 12 percent per year, CDC stock price should increase to 28,000 dong per share to break even for this strategic investment.
There is no information whether TLS has sold the shares or not, but until now Rubber Finance JSC still holds nearly 2 million shares of CDC, of which, 1.2 million was from the strategic stock purchase.
With the current market situation, bondholders of the Saigon Securities Joint Stock Company are not worried by investing in SSI convertible bonds, they can take money and not take losses on bonds converted into shares. The rate of SSI convertible bonds is equivalent to 37,000 dong per share, higher than the price of 22,000 dong per share at present.
Next March 2011 is the conversion period of SSI convertible bonds, many investors expect the possibility that SSI shares will increase nearly 100 percent for bondholders to gain the full benefits of the conversion into shares.
Although receiving only 4 percent interest rate of SSI bonds per year, not suffering any loss in a tough year like 2010's stock market can be considered a success by those who bought SSI bonds.
A SSI bond-holder said: "Even if the SSI stock price at the time of converting increased equal to the bond conversion price, I will still get the money back to restructure my portfolio, and increase the ratio of cash."
Director of an issuer of convertible bonds to foreign institutional investors, said: "When you buy bonds, foreign investors have determined the enterprise value by the method of valuation basis. They see it as a benchmark rather than attention to the market value of shares".
After one year of the booming issuance of convertible bonds, far ahead of conversion, many investors found that they were lucky with investment options of convertible bonds a year ago, when everyone was optimistic about the market than now.
