Amarin Corp Plc (AMRN)

[jessellivermore]

Pharma dude..

Re the short position.

The Amarin short position must be understood in terms of the Jan 9 2012 converible notes issue.

"The notes will be exchangeable prior to October 15, 2031 only under certain circumstances and during certain periods, and will be exchangeable thereafter regardless of those circumstances. The exchange rate will initially be 113.4752 American Depositary Shares of Amarin ("ADS") per $1,000 principal amount of the notes (equivalent to an initial exchange price of approximately $8.81 per ADS), subject to adjustment in certain circumstances. The initial exchange rate for the notes represents an approximately 25% exchange premium over the last reported sale price of the ADSs on January 3, 2012, which was $7.05 per ADS. Upon exchange, the notes may be settled, at the Issuer's election, in cash, ADS or a combination of cash and ADS.

The notes will accrue interest at an annual rate of 3.5%.

To understand the "short position" you have to understand that these "convertible (into common) notes were not redeemable before 2017 except under very specific circumstances. Also these notes were drawing 3.5% annual interest at $8.81 per bond. These notes were only sold to "qualified buyers (banks, funds, etc.).

These conditions set up a compelling hedge. The buyer simply has to short 113 AMRN shares for every $1000 worth of notes he holds. This sets up a neutral stock position, you are essentially "selling short against the box" You get your $8.80 (the cost of the note) back on the short sale and end up making 3.5% annual on principal amount of notes you still hold. The only cost being the money required to secure your short position. This is very little if you are a bank or a fund.

Basically everyone who bought the convertible followed this hedge. This results in over 15 MIL SHARES that are being shorted, not by guys betting on the stock going down, but by big players taking advantage of very cheap money. In these hedged shorts there is no danger of a short squeeze because they are hedged by owning the convertible.

":>) JL