Patient Access Solutions Inc (PASO)

[MNK3240]

Tender offer: take it or leave it
For all convertible preferred shares, one key piece of info is the “conversion ratio” or “conversion price” (subsequent conversion from preferred to common) post merger. This determines whether you will be benefited with increase of common stock price. If the conversion ratio is known and the stock price is higher than conversion price/ratio post merger, you can benefit from convertible preferred as you will get a premium for that. It works more like employee stock option.

Example: If we know that post merger, 1 prefd. can be converted to 250 common for example, then we know that our cost price was 0.06c ($15/250=0.06). Later on if the stock price is 0.15c for example, we know that if we convert, we will benefit from it (0.09c/share). The other advantage of convertible preferred is if stock price goes down, your preferred works like a bond, no decrease in value.

In the recent PR, PASO has not provided this key info (I.e., conversion ratio post merger). They mentioned 1 prefd for 250 common for tender offer but they did not indicate the conversion ratio from prefd to common unless they meant the ratio will remain same both ways.

Final words: Once we know the conversion ratio subsequent to merger or conversion price (I.e., from preferred to common), then it will be easier for us to decide if we should accept the tender offer.