Halozyme Therapeutics Inc (HALO)

[biotechinvestor1]

Read the press release and put yourself in the shoes of the lender. They are willing to give Halozyme an unsecured roughly $700 million loan with a pathetic 0.25% interest rate. This is well below CPI inflation and a fraction of what the lender could have earned investing in risk free treasury bills. It’s essentially a negative real rate of return unless they can convert the notes into shares. This conversion, however, is only profitable if and only if halo’s stock price is well north of $77 at the time of conversion.

This is a major sign of confidence by noteholders (smart institutional money) in the price performance of Halozyme’s shares. It’s also a brilliant way for halozyme to pay off the old notes without diluting the shareholders at current low prices.