For most shareholders, this deal makes no sense. It makes sense for people like vendors who ended up with shares and would have something that is more like a bond since it will pay interest and they have no interest (or limited interest) in equity upside (ie they want to just get money).
Using .24 cents, its about 112 shares of SIAF for the preferred. So although you get a equity kicker on the backend of 15 shares, you are losing 112 shares to do it.
The conversion price is 1.00+, so at .24 cents, you are giving up .76 to pay for this option, so you breakeven at 1.76, which signals that they think the equity will be far higher/or someone taking this deal thinks the equity will be far higher.
If the dividend is 2.80/112 shares = 2.5% yield.
If you take this deal you basically converting into a bond like instrument with a equity kicker. But you are losing a lot of your equity upside since you are effectively losing shares (but get a dividend). The dividend is optional and determined by the board of directors, so its not guaranteed.
This deal makes no sense for a common investor who intended to get equity-like returns. You are giving up:
All appreciation until 1.76 a share (using .24 cent price)
You get 1 series G + potentially 15 shares, so you have 16 shares instead of 112
You get a 2.5% dividend potentially, but not guaranteed
You get 20 votes per share, but you are giving up 112 votes to get it.
Once again, this really make sense for people who ended up with siaf shares like vendors that really want a bond like instrument with some limited upside. I don't think this applies to most people on this board.
The probable expectations is the soak up all the shares they issued last year for a low cost (2.5%) since the majority of people who got paid in shares are stuck (since the were issued at .55 for payment and we haven't traded near that in awhile).
If he can soak up the shares, then the reverse of what happened before will happen, shares will rise since the people with collateral shares will no longer be there and it will mostly be normal share holders. Plus, the sell wall at .55 that would be there would be gone (since all those vendors would be made whole at .55 if they are still holding shares).
This is targeted at vendors that have shares, and if it works it would lift the stock price since these sellers would be gone.
My best guess is that these shares would NOT get the TRW dividend for several reasons, one as mentioned above this is to get rid of dilution. Second, in the last release it talked about "corporate exercises" to take places before issuing TRW shares, this is to soak up those shares so the remaining common get the TRW shares they were supposed to get in the first place. Lastly, vendors don't want TRW shares they want money, so it wouldn't make sense because this is targeted at them.
So, logically speaking these should NOT have TRW attached to them, but then again SIAF has never been logical. But the good news is for us common holders if it goes thru we will hopefully get reverse diluted and some of our TRW and book value back.
At least it appears he is trying to repair the equity which is a good sign.
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