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Step 1: Convert FCCB Into Shares. Step 2: Sell Like There's No Tomorrow (Suzlon)

Deepak Shenoy1 min read
Quick Facts
What is "Step 1: Convert FCCB Into Shares. Step 2: Sell Like There's No Tomorrow (Suzlon)" about?
What category is this article in?
Stocks
Who wrote this article?
Deepak Shenoy, Capitalmind's research team.
When was this article published?
Published 22 September 2014.
How long does this article take to read?
1 min read

Suzlon’s shares have fallen around 20% in two days (10% every day). The stock is now halfway down from the peak.

Why?

It seems that FCCB holders have converted $69 million worth bonds to shares at Rs. 15.46 per share. That’s 27.04 cr. shares more. The company earlier had just 278 cr. shares issued, so this is a 10% dilution. (to 305 cr. shares)

It appears like those FCCB holders who converted have attempted to sell in the market, leading the market to have no buyers, just sellers (lower circuit).

The new shares have been listed on September 19 (Friday) which is when they had been sold, continuously. Suzlon had moved up from 14 n May to more than 36 in mid-June, and has been on a downslide since.

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The folks who converted include:

  • Cowell and Lee (Mauritius) : 5 cr. shares

  • Goldman Sachs (Mauritius) : 5.6 cr. shares

  • Deutsche Bank AG (London): 5.3 cr. shares

  • Merrill Lynch Espana : 3.5 cr. shares

And it gets worse. There is $477.5 million worth FCCBs still remaining to be converted. If they are converted, it would result in 186 cr. shares more being issued (another 60% dilution!)

We had written about the massive dilution earlier. (See: Suzlon faces 70% dilution on FCCB Restructuring proposal) But look, the stock took off from there and is still about 30% above the price when we wrote that post. The euphoria of that stock seems to have faded and now what’s left is a lower circuit.

Disclosure: No positions, no plans for positions either.