Is the debt-to-equity swap good or bad?

Debt to equity refers to the establishment of financial asset management companies by the state, the acquisition of banks' non-performing assets, and the transformation of the original creditor's rights and debt relations between banks and enterprises into equity and property rights relations between financial asset management companies and enterprises. After the creditor's rights are converted into equity, the original principal and interest payments are changed into dividends according to shares. Let's take a look at whether the debt-to-equity swap is good or bad.

Is the debt-to-equity swap good or bad?

There is no absolute conclusion whether the debt-to-equity swap is good or bad, but it is bad in the short term, because the condition of the debt-to-equity swap is to make more money by swapping bonds into the company's common stocks, increasing the number of shares in circulation. 10 million shares have now turned into 10 million shares into 20 million shares. The stock price bought when 10 million shares was 5 yuan. Is the stock price still worth 5 yuan after 20 million shares? So the share prices of most companies with convertible bonds can't go up. In the long run, it depends on quantity and the fundamentals of the company.

What are the characteristics of debt-to-equity swap?

1. Creditor's rights: convertible bonds have the same interest rate and term as other bonds, and investors can choose to hold bonds at maturity and charge principal and interest.

2. Equity: convertible bonds are pure bonds before they are converted into stocks, but after they are converted into stocks, the original bondholders become shareholders of the company from creditors and can participate in the business decision-making and dividend distribution of the enterprise.

3. Convertibility: convertibility is an important symbol of convertible bonds, and bondholders can convert bonds into stocks according to the agreed conditions. Equity conversion is an option enjoyed by investors and not available to general bonds.

The impact of debt-to-equity swap on stock prices?

1. The debt-to-equity swap has both the nature of bonds and equity for investors, and it is a choice for investors to avoid sub-insurance. usually, the coupon rate of the debt is low, and when the stock price rises, investors get double gains. Early redemption is a way for issuers to restrain investors' returns. Foreign debt-to-equity swaps generally redeem 20% in advance, compared with 30% in China. Early redemption investors all choose the way of debt-to-equity swap, and no investor will want cash and give up 30% premium income.

2. The company touches on debt-to-equity redemption in advance. Generally speaking, the development of the company is ideal, which is reflected in the stock price. In addition, debt-to-equity redemption in advance will not use the company's funds, but the number of shares increases and the financial expenses are reduced. It is better than simply issuing additional stocks, and there is no pressure for the company to pay interest.

3. It is easy to raise funds, and the scope of use of funds is relatively loose, which lays the foundation for mergers and acquisitions.

4. Do not worry that the debt-to-equity swap will depress the stock price. The debt-to-equity swap is generally aimed at strategic investors. Xiaosan is not qualified. These people should know the operation of the company and will not easily sell stocks that they think have great room for growth.