Off-Exchange Opportunity Involving a Tiny Biotech Firm! Can it Treat Parkinson’s?

Friday File look at a Breakthrough Technology Alert teaser, plus some watchlist notes

By Travis Johnson, Stock Gumshoe, September 25, 2015

We’ve got a little teaser stock that has been teased before to briefly share with you, and earlier today I posted an updated look at a Dan Ferris teaser for Altius (again), but I do have a couple other quick notes to get to first.

First is that while I was noodling around and looking at Anthem (ANTM) because it was being teased by Louis Navellier earlier in the week, I ran across their exchange traded mandatory convertible bond, and I thought some income-oriented readers might find it interesting. That bond trades at ANTX, and it’s basically a way to earn a yield in the neighborhood of 5% while also getting some upside to ANTH if it rises by more than 30%… though it is, of course, more complicated than that.

This actually works as both a bond and a stock purchase contract and was originally sold for $50 a share in May of this year, it will pay quarterly distributions at an annual rate of $2.625, 1/3 of which is from the underlying bond and 2/3 of which is from the contract adjustment (apparently, what the holder’s commitment to buy $50 worth of stock in 2018 is worth) and will effectively mature in May 2018 when you are obligated to turn that ANTX share into ANTM shares.

The upside possibility comes if ANTM is trading at above $207 a share — and the downside comes if it is below $143 a share. Between those two prices, you effectively just divided the current share price by $50 and that’s the settlement rate, the number of shares you get… so really, you just get $50 worth of shares in 2018 at whatever the price is then, as long as it’s between those two prices. If the shares are at $160 on that date, for example, then you’d get 50/160ths of a share for each ANTX you hold, so .3125 shares, and you could do what you want with them after that, including sell them and be done with it after receiving your 5.25% yield for three years.

The downside risk is, other than the fact that ANTX could certainly trade lower because investors decide that 5.25% is not a worthwhile yield for them and demand something higher, that if the shares are below $143, you end up losing principal — and that’s a very real possibility, since they’re ...

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