Going to be pressure on this for a while.
Bounce maybe tomorrow, but it's gonna be a gone soon. Wouldn't bottom pick this one.
Bounce maybe tomorrow, but it's gonna be a gone soon. Wouldn't bottom pick this one.
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CIT is toast
- Thread starter athlonmank8
- Start date
The 8K for the CIT debt exchange offer came out a little over 1 hour ago.
http://www.sec.gov/Archives/edgar/data/1171825/000095012309047816/y02330exv99w2.htm#115
Basically if 100% of the debt is tendered, the bondholders get 94% of equity in the new structure.
If the minimum value of bonds is tendered in order for the exchange to proceed, then bondholders get 91% of equity in the new structure.
Keep in mind that in addition to the existing common stock, there is also outstanding preferred stock held by the general investing public, as well as the $2.3 billion in TARP preferred held by the US Treasury.
So either way, existing common shareholders get diluted significantly.
However the stock is up (!) in premarket to a range between 1.25 and 1.35.
Am I missing something here?
Or is this just another case of "the market can remain irrational longer than you can remain solvent"?
On that score, my cost basis for my CIT short position is in the 1.40s from earlier this week.
I am targetting a cover of something close to 50 cents.
I do realise that the debt exchange offer doesn't close until the end of October, so it make take a while for the common stock to fall below $1.
http://www.sec.gov/Archives/edgar/data/1171825/000095012309047816/y02330exv99w2.htm#115
Basically if 100% of the debt is tendered, the bondholders get 94% of equity in the new structure.
If the minimum value of bonds is tendered in order for the exchange to proceed, then bondholders get 91% of equity in the new structure.
Keep in mind that in addition to the existing common stock, there is also outstanding preferred stock held by the general investing public, as well as the $2.3 billion in TARP preferred held by the US Treasury.
So either way, existing common shareholders get diluted significantly.
However the stock is up (!) in premarket to a range between 1.25 and 1.35.
Am I missing something here?
Or is this just another case of "the market can remain irrational longer than you can remain solvent"?
On that score, my cost basis for my CIT short position is in the 1.40s from earlier this week.
I am targetting a cover of something close to 50 cents.
I do realise that the debt exchange offer doesn't close until the end of October, so it make take a while for the common stock to fall below $1.
For you arbs, CIT-C is convertable at any time into 3.9526 shares of CIT. You may want to look at the spread.
Yeah, gonna see pressure on it for a while. Should be enough to break it.
Goldman in the picture again....would like to know who that insurance is from.
Goldman in the picture again....would like to know who that insurance is from.
Quote from athlonmank8:
Going to be pressure on this for a while.
Bounce maybe tomorrow, but it's gonna be a gone soon. Wouldn't bottom pick this one.
Nice to see it got that bounce. Now here's the kicker.
It did in fact bounce on Friday as obvious proof where traditional TA lacks.
Nice to see if Maestro and Thunderdog (the 2 geniuses of ET) could explain this.