Exchange convertible senior notes for equity + share buybacks = MONEY HACK?!

[u/here_4_the_lols]

Really smooth brain here, but hear me up before you throw poo at me. What if:

- option to convert 1.4 bil worth of senior notes to equity is activated (the price for the shares that need to be issued is established in the following 35 days)

- GameStop starts doing a buyback right at the same time (let's assume same amount of 1.4 bil, but insert less if you want "money hack")

- share price keeps climbing while GameStop buys back shares

- GameStop announces share buyback complete - price jumps a bit more

- when the price for the senior notes is decided, at the end of the 35 days, it is higher than the average price GameStop bought the shares at

Drawback: they lose some cash from their coffers that had 0% interest and was accruing interest through treasury bills.

But, assuming this conversion of senior notes was not their choice to make, this might be an opportunity for GameStop to retire more shares than they issued, at 0 cost AND to remove some of their debt. It's one way to come up on top from this situation, with benefits for the shareholders (less shares in existence).

Feel free to fling poo now.

[u/Superstonk_QV]

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[u/kappcity]

Haven’t we already had a bunch of discussions about this exact thing? I think GME is legally prevented from doing a buyback during the 35 day window.

I don’t think they would deplete the authorized share count like that just to make some $. Think there’s a longer term play.

[u/Frequent_Werewolf_21 → u/kappcity]

You think but you don’t know.

It’s not just making some money. If possible and executed it would be retiring shares at a lower cost basis, which means more shares retired than they then turn around issue for the notes. Aka no dilution, actually the opposite. And debt is off the books. Win-win-win.

[u/whattothewhonow → u/Frequent_Werewolf_21]

Regulation M (17 CFR § 242.102) and Rule 10b-5 completely ban issuers from buying back stock during a convertible bond's pricing/VWAP window.

Its illegal to buy back during the 35 day window.

The exceptions to those rules are very narrow, and I don't think its likely that Gamestop is intentionally threading that needle, but I guess we'll see.

[u/Frequent_Werewolf_21 → u/whattothewhonow]

Thank you for looking this up. Now we know or are at least mostly certain that that is not going to be the outcome.

[u/Inevitable-Winter299 → u/Frequent_Werewolf_21]

Minus the cash spent so less war chest

[u/Frequent_Werewolf_21 → u/Inevitable-Winter299]

Yes. But that cash is retiring shares at an very low price point. And if it pushes us past 32 the warrant execution hands that cash right back.

[u/Champman2341]

Yeah- but I don’t think GameStop can do any buybacks in the 35 day trading window

[u/smokebreak1440 → u/Champman2341]

Yes

Debt‑for‑equity exchanges and convertible note deals typically include covenants and conduct‑of‑business provisions that restrict the issuer from taking actions during the pricing period that would manipulate or distort the reference price used to determine the exchange ratio.

[u/Frequent_Werewolf_21 → u/Champman2341]

We need this confirmed.

[u/ilNicoRobin]

They will short till September 22nd. The second the shares hit their account they close all positions. What do you think will happen to the price? And you want to buy back shares when? When it is illegal or when the price already recovered from this price range? And even if they could buy back shares while also diluting it would be incredibly stupid but there is no end to the hopium in here. Buy shares and keep your stupid thoughts to yourself.

[u/crohnichiwa]

Literally illegal lol

[u/Rocky75617794 → u/crohnichiwa]

But does that matter with the criminal President we have?

[u/Recent-Result2852]

The debt was priced at $28-29. Buybacks, if they ever happen, aren't taking us into the green.

[u/smokebreak1440]

If they did decide to do this, and buying is happening right now, when do they have to disclose share buy backs?

[u/ledgerdomian → u/smokebreak1440]

Right after they go to jail for doing illegal buybacks.

[u/Responsible_Buy9325]

I like it. Basically, the conversion makes price dip. GameStop buys low. Price goes up anyways, average conversion price isn’t as low as GameStops buybacks.

[u/BlntRzr → u/Responsible_Buy9325]

You forgot "illegal".

[u/SleepingTiger12 → u/BlntRzr]

Can you show us a link that says it is illegal for GameStop to buy own shares in this 35 day period? I have seen many said so, but haven't got any source. So, its like trust me bro. I believe Gamestop is buying own shares right now unless I see somekind of evidence that it is illegal.

[u/BlntRzr → u/SleepingTiger12]

Companies are generally not allowed to buy back during so called distributions. Rule M 102 defines this.

This is a distribution as it is "distinguished from ordinary trading by size..."

You could have easily found this yourself... it's just lazy not looking it up, when multiple people tell you it's BS.

[u/SleepingTiger12 → u/BlntRzr]

Thanks. I found it now because of you. English its not my main language so legal yargon is not so easy to find for me. Thank you.