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Case
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Reference no. 102-026-1
Published by: INSEAD
Originally published in: 2002
Version: 06.2015
Revision date: 05-Apr-2016

Abstract

This case discusses the potential benefits and costs of issuing floating priced convertibles, also referred to as 'death spirals'. These are convertibles where the conversion price is a discount from the market price in a look-back period. The management of Log on America (LOA) is blaming investment banks and convertible investors for the stock price collapse after the convertible was issued. Comparing costs and benefits of floating priced convertibles with other methods of financing such as debt, equity and convertibles with a fixed conversion price. Acting as an 'expert witness' in the lawsuit between LOA and Credit Suisse First Boston: what is the cause of the stock price decline? Valuing floating priced convertibles under different assumptions about contract design.
Location:
Size:
USD50 million
Other setting(s):
2000

About

Abstract

This case discusses the potential benefits and costs of issuing floating priced convertibles, also referred to as 'death spirals'. These are convertibles where the conversion price is a discount from the market price in a look-back period. The management of Log on America (LOA) is blaming investment banks and convertible investors for the stock price collapse after the convertible was issued. Comparing costs and benefits of floating priced convertibles with other methods of financing such as debt, equity and convertibles with a fixed conversion price. Acting as an 'expert witness' in the lawsuit between LOA and Credit Suisse First Boston: what is the cause of the stock price decline? Valuing floating priced convertibles under different assumptions about contract design.

Settings

Location:
Size:
USD50 million
Other setting(s):
2000

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