InvestorsHub Logo
Followers 19
Posts 660
Boards Moderated 0
Alias Born 08/13/2013

Re: richrichbr post# 19409

Wednesday, 09/04/2013 10:59:55 AM

Wednesday, September 04, 2013 10:59:55 AM

Post# of 30248
The preferred shares have a lock up period. Then they can be converted into common shares. To hedge your risk you sell the common shares short today. Borrow them through securities lending and as soon as the preferred lock up is over you convert and return the borrowed shares. That is what the debtholder did with a part of his preferred shares. The short position will vanish in a few months without any buying pressure. No buying needed to cover. Just a convert from preferred to common.
That is a common strategy when you do a financing. Otherwise you run a risk that the pps is much lower the day you can convert.