You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
credit facility question
- Thread starter NY_HOOD
- Start date
the relationship between a credit card and individual person
is very similar to
the relationship between a credit facility and a corporation.
if a firm has a $200 million credit facility, it means it means the bank has already approved $200 million worth of borrowings.
if the company is doing well financially, the credit facility has no bearing on the stock price at all. if the company is distressed, then the credit facility is very important. usually, if the bank is willing to relax the terms of the facility or increase the amount, it means the company has access to more cash and can live longer. otherwise, it's going into chapter 11.
is very similar to
the relationship between a credit facility and a corporation.
if a firm has a $200 million credit facility, it means it means the bank has already approved $200 million worth of borrowings.
if the company is doing well financially, the credit facility has no bearing on the stock price at all. if the company is distressed, then the credit facility is very important. usually, if the bank is willing to relax the terms of the facility or increase the amount, it means the company has access to more cash and can live longer. otherwise, it's going into chapter 11.
when you say dilutive, i'm assuming that you mean more shares are issued. in this sense,
a credit facility is not dilutive.
a shelf registration is dilutive only if the shares are eventually issued. a shelf registration means the company has already completed all the legal and regulatory documents to issue the shares. it doesn't mean that the shares are issued and outstanding. when the company wants to issue the shares, it can do so quickly because all the regulatory documents are done.
a convertible offering is an issuance of convertible bonds. convertible bond holders have the option of converting the bonds into shares after a certain date using a certain strike price. it is dilutive if the current share price is higher than the current strike price.
a credit facility is not dilutive.
a shelf registration is dilutive only if the shares are eventually issued. a shelf registration means the company has already completed all the legal and regulatory documents to issue the shares. it doesn't mean that the shares are issued and outstanding. when the company wants to issue the shares, it can do so quickly because all the regulatory documents are done.
a convertible offering is an issuance of convertible bonds. convertible bond holders have the option of converting the bonds into shares after a certain date using a certain strike price. it is dilutive if the current share price is higher than the current strike price.
Quote from NY_HOOD:
so its not dilutive? how bout the shelf offering,idoes that cause a stock to go down? what about a convertible offering? what the hell is that?
in terms of economics, there should be no effect. although the firm is issuing more shares, the firm is also getting more cash from the share issuance. therefore, both the numerator and denominator increases. they net each other out.
price per share = equity value / # of shares
price per share = equity value / # of shares
Quote from NY_HOOD:
real quick,although a shelf offering does not mean the company will issue more shares,does the share price usually drop on this news?