The environment and microclimate of multi-issue convertible bonds


Editor’s Note: This article is from the WeChat public account “Technology” (ID: kejishuo), the author Laotie 007, 36 is authorized to publish.Since 2019, many stocks listed in the US have chosen to obtain new financing through the issuance of bonds. For example, Wei Lai issued 650 million US dollars of convertible bonds at the beginning of this year, with a coupon of 3.5%-4%.At 27.5%-32.5%, iQiyi released a $1.05 billion six-year convertible bond in March this year, with a coupon rate of 2% and a conversion premium of between 27.5% and 32.5%.Recently, the company has also announced the issuance of 875 million US dollars of convertible bonds, the interest rate is 0, the conversion premium is in the range of 32.5% – 37.5%, of which the conversion premium is the value of the investor’s share transfer, the higher the value for the bond issuerIt means lower costs.Overall, the cost of financing this time is lower than the above-mentioned enterprises.Convertible bonds, as bonds with three characteristics of creditor’s rights, equity and options, have been favored by domestic and foreign high-growth companies in recent years, even in the early 1990s, low cost of financing.Convertible bonds are also an important means for Amazon to obtain funds.In this article, we will focus on: 1. The deep-seated reasons for the low cost of this financing; 2. After the financing, there will be a lot of new adjustments in the business side.A lot of low-cost financing: the loose monetary policy environment and the microclimate of enterprises Since 2019, the downward pressure on the global economy has increased sharply, and the market pessimism has permeated. The US government changed the radical means of raising interest rates last year and turned to lower interest rates.Mobility has boosted economic morale, and so far, interest rate cuts have been made twice.Affected by this, the US bond market has undergone considerable changes, and the income of medium- and long-term government bonds has dropped significantly. See the picture below for the profit from the UK. Now the US 10-year government bond has fallen nearly half from the peak of the previous year. For enterprises, low interest ratesThis is an excellent opportunity for financing. In early September, Apple, which holds more than $200 billion in cash, issued $7 billion in corporate bonds. Bond yields may be about 1.25 percentage points higher than US Treasury bonds, which is not as good as last year’s peak national debt level.Affected by this, Disney and other companies have also recently issued debt issuance work, thereby using low financing window reserves.This is also a major reason why the above-mentioned stocks have recently accelerated financing. When the financing costs of domestic banks and corporate bond markets are at least 5% or more, convertible bonds can solve the problem of cash flow and stabilize low cost with low risk.The capital market attracts cash.However, the odds of the 0 interest rate and the conversion premium in the range of 32.5%-37.5% make the financing cost lower than the above-mentioned Chinese stock companies, which is worth analyzing.We will analyze the following aspects: First, the market value management problem for investors, the main profitable methods of convertible bonds are: 1. The market value premium before and after the bond is converted; 2. The hedge fund combines the stock bullish bearish portfolio to hedgeOverall investment risk.All in all, under the consensus that “convertible bonds are future call options”, the pre-market value management of enterprises has great reference value for investors.Since the completion of the IPO in 2018, the stock price has dropped from the peak of 13.8 US dollars to the current 1.75 US dollars. The market value has shrunk by more than half. The iQIYI share price has increased significantly at the beginning of the year, but it is still quite a distance from the peak of 33.5 yuan.To a certain extent, this will affect the “bullish enthusiasm” of investors. In order to stimulate the sale of convertible bonds, it is necessary for enterprises to attract investors with high interest rates. Take Wei as an example, 3.5%-4% of the coupons areIt is the high price of the current convertible bond market, even higher than the corporate bond (non-convertible bonds) issued by Apple earlier this month. The low level of the conversion premium is also to stimulate investors to convert their shares earlier and set a lower conversion price..Since the 2019, the share price has increased by more than 50%. See the chart below. The stock price chart is now more than the market value of Baidu, reaching $36.3 billion. It is a new force in the domestic Internet.Stable growth has given investors a great deal of confidence, and the chasing characteristics of “call options” have been promoted, resulting in low risks.Secondly, from the perspective of risk, although the convertible bonds have the advantage of low cost, due to the two characteristics of equity and options, if the grasp is not good, for the enterprise, there is a shaken shareholding structure and diluted earnings per share.Continue to take Weilai as an example. When the convertible bonds are issued, the stock price is 6.7 US dollars. If the investors convert the shares at a premium of 32.5%, if the bonds are fully converted, it will bring nearly 74 million new shares, and then the total number of shares will beAt around 7%, although Weilai has restricted the restriction of a single investor to buy up to 100 million US dollars of bonds, it has somewhat avoided the pressure brought by the concentration of shares, but added more than 74 million new shares, which will be caused by the next earnings per share.The impact is also difficult to avoid.Look at the fight too much.If the total financing amount of 875 million US dollars will be transferred to 42.61 US dollars, it will bring 20.53 million new shares. By then, the total share ratio will be less than 2%. Even if the bond sales of 1 billion yuan are completed, the impact will be within the controllable range.As a hedge buyer with the largest convertible bond, after buying convertible bonds, it tends to hedge the risk by selling short stocks (if the stock falls, the short selling behavior benefits, if the rising convertible bonds benefit, the risk is controlled to a minimumValue), if the company itself does not have to resist the risk strength, the proportion of debt is too large, short selling will bring a certain degree of upward pressure on the stock price, which is also a big practical problem that Wei Lai will face next.The same is true for the fight. Although the previous share price has increased significantly, it is the next important task to stabilize this momentum and boost market confidence.After financing, what are the plans for more? Before we analyze this problem, we first correct the following points: The financing premise is that the company lacks cash.At the beginning of this article, Apple and Disney are used as examples to explain the low-interest interest of enterprises in the financing market, especially Apple, which is to issue debts to pay dividends. The financing of convertible bonds can also be regarded as a low interest rate background.Arbitrage under.By the middle of 2019, there were a total of 23.9 billion yuan in cash and equivalents, an increase of 9.7 billion yuan from the 14.2 billion yuan at the beginning of the year. After the completion of the IPO, the growth of the fight was much more obvious. The annual GMV of 2018 exceeded 400 billion yuan, and it is expected in 2019.Over the trillion yuan mark, in addition, the monetization rate has gradually increased in recent quarters, which directly reflects the accumulation of cash flow capacity (in the first half of 2019, operating activities generated a cash flow of 2.6 billion yuan).It is particularly noteworthy that since the listing, the company has adhered to the infrastructure of “not touching logistics”, which makes it slightly conservative in terms of fixed asset purchases and stabilizes cash flow in addition to market expenses.In response to this convertible bond financing, the company said that the proceeds from the issuance will be mainly used for platform R&D investment and new agricultural infrastructure construction.R&D investment is relatively easy to understand, which is also the main feature of Internet companies, we will not repeat them.Recently, I have been emphasizing the upward work of agricultural products, such as the sales of coffee beans in Yunnan. However, in the ascending agricultural products, there are several major problems that have been difficult to overcome: 1. Agricultural products, especially fresh agricultural products, from the source to the main line.Logistics efficiency and cost issues in the middle of logistics, including roads, cold chains and cold storage; 2. High-input and low-yield issues of agricultural products in the early stage of large-scale production, and brand upgrades in the medium term.The above problems are also the main reason why the agricultural products have been lagging behind the development of other categories of e-commerce. If you want to speed up the agricultural products, you have to do a good job in the above.If the financing is finally completed with US$1 billion, equivalent to RMB 7 billion, we believe that the upstream end of agricultural products will be mainly used in: First, the cost optimization and efficiency improvement of the source of agricultural products, especially the construction of cold chain logistics and cold storage.The means can be diverse, such as borrowing, investment, etc. Second, online quality agricultural products are supported by flow and resources to ensure the simultaneous increase of sales volume and brand.Among them, the former will be direct capital consumption, while the latter will affect the performance of the monetization rate, which will have a certain impact on revenue.More than a lot of debt is issued, we believe that the capital market has recognized the performance of the previous stage, which is also the first to achieve 0% coupon and 0% yield to maturity and set the “issuer redemption” clause.The main reason for technology platform-based enterprises, but also a new pressure on the new tasks in the next cycle, combined with the conversion price of 42.61 US dollars and the issuer’s redemption right of 55.39 US dollars as a reference, the fight in the medium-term market value should be 500-In the range of 65 billion US dollars, the competition in e-commerce has intensified. In particular, under the premise that the major giants are betting on the sinking market, the competition is still going to grow steadily. The difficulty is quite large, and this is also the need to continue to do in agriculture.The article hopes to break through the main reasons in the new field.In short, the release of this convertible bond is mainly based on positive factors..