Hi I just have a quick question in regards to convertible bonds
Say for example:
•Company XYZ has 300m shares already outstanding
•On the 1st of Jan 2007 the firm decides to issue $350m of convertible bonds which are to mature at the end of 2017 (i.e. 10yr maturity)
•Each bond has a face value of $1000 and thus there is 350,000 bonds outstanding
•Conversion Price into ordinary equity (CP) = $10 and hence each bond is converted into 100 ordinary shares (i.e. Face value/CP = 1000/10)
•Therefore $350m worth of convertibles leads eventually converts to 35,000,000m shares. (i.e. Bonds Outstanding*100)
So my question is this:
Do these extra 35m shares which are a result from the convertible bonds count towards the number of shares outstanding for XYZ from the date of the issue (2007) or at maturity (2017)?
Any help would be much appreciated.
YT I have seen you have had to incoroporate converitble bond issues into your valuations before, so maybe you have the answer to this question?