QUOTE(cherroy @ Nov 22 2007, 04:08 PM)
Yes, you are right. But issuers are not dumb, they can hedge themselves out.
They issue C1 at 1.00, conversion at 2.00 while mothershare is at 2.00. They already make 1.00 out of it, as public are actually buying at 3.00 (1 + 2 exercise price) for the mothershare actually, they can hedge themselves out with buying the mothershare at 2.00, so even the mothershare shoot to 5.00, they are making 4.00 (1.00 from issuing CW + 3.00 from the mothershare), while just losing 3.00 at for the cash settled C1. If they hedge themselve, in whatever situation, they are the ultimate sure winner.
That's why I always said CW is a money printing machine for the issuers. Currently there is overflow in the market, it just mean 'sucking' public money only, not a healthy situation if too many CW in the market. One ChinaMobile already got 7 CW aka C1...C7.
They can also doing arbitrage as well (if got the same CW listing in HK or elsewhere as well). Arbitrage is even more billiant move, if can do it. They are plenty of proffesional traders doing arbritrage in the market especially those matured and developed market. Arbritrage is much more complicated for some new comers in the market, but if you know it, it is quite simple as well.
Got it! Thanks!! They issue C1 at 1.00, conversion at 2.00 while mothershare is at 2.00. They already make 1.00 out of it, as public are actually buying at 3.00 (1 + 2 exercise price) for the mothershare actually, they can hedge themselves out with buying the mothershare at 2.00, so even the mothershare shoot to 5.00, they are making 4.00 (1.00 from issuing CW + 3.00 from the mothershare), while just losing 3.00 at for the cash settled C1. If they hedge themselve, in whatever situation, they are the ultimate sure winner.
That's why I always said CW is a money printing machine for the issuers. Currently there is overflow in the market, it just mean 'sucking' public money only, not a healthy situation if too many CW in the market. One ChinaMobile already got 7 CW aka C1...C7.
They can also doing arbitrage as well (if got the same CW listing in HK or elsewhere as well). Arbitrage is even more billiant move, if can do it. They are plenty of proffesional traders doing arbritrage in the market especially those matured and developed market. Arbritrage is much more complicated for some new comers in the market, but if you know it, it is quite simple as well.
Nov 22 2007, 04:29 PM

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