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Forums - Sony - Sony to sell $1.9bn of conv bonds, stock down 10% in early trading.

Wh1pL4shL1ve_007 on 14 November 2012
Paul said:
Should I invest in these or greek bonds?


Question of my life lol. 



Yay!!!

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zuvuyeay on 14 November 2012

are we going full circle and ending up with a guy making dab radios in his shed

of course debt is a problem but it's nothing unusual,not making money is the bad thing,it's quite interesting about the old style and japan like europe are the old empires which are retracting and nowhere to go,japan has lost it's electronic empires now,are there still any giant japanese companies kicking arse out there,toyota?



                                                                                                                                        Above & Beyond

   

fordy on 14 November 2012
Kasz216 said:
Adinnieken said:
Kasz216 said:

I don't think the selling of bonds is so bad, a lot of companies sell bonds.

The distrubing part is that they are zero coupon convertable bonds rather then just regular bonds.

 

Zero coupon bonds are bonds that don't offer any interest payments.  Sony switching to Zero Coupon bonds suggests they're worried about paying interest on more bonds.   As such, Zero Coupon bonds go for much less in auctions.

Sony is offseting this by making them converable... So you can turn them into stock if you want at the end of the period.   Convertable stock basically being a "gamble".  Your stock MAY be worth the $100 note it's in, or if Sony's stock rises up... you may get back $120 worth of shares in Sony stock.

 

To me, it sounds like Sony is afraid to have to pay interest for bonds, but is making their bonds convertable because they are also afraid yields would be too low so that they would have to give away too much money 5 years from now that would break them.

So they are trying to create "Pot Odds" more or less by offering to cut into their own profitability more, if the company turns it around.

 

Suggesting they are very worried they won't have it turned around in five years.

 

EDIT: Also, I beleive it's a bad sign they are avoiding the US Market.  As the US Market tends to be more up/down... which again suggests that they think people won't look on these bonds too favorably.   It reminds me a lot of the various Euro countries that went in debt.

What happens to bonds if the company goes under or is sold?  Are bonds debt and do bond holders have the same clout as stock holders when it comes to bankrupt companies repaying debt?

Bonds are debt.

Bond holders actually have more clout when it comes to being repaid on a Bankruptcy then stockholders do. 

Stockholders are generally last when it comes to Bankruptcy filings.

I don't think Sony will go Bankrupt within 5 years but... they're far unhealthier then I thought.  To me it sounds like Sony is planning to kind of just limp along in the short term and wait for it's oppurtunity to see a big change, but doesn't see such an oppurtunity at the moment.

They would still have options and moves to play to prevent bankruptcy, they're just... bad ones that will hurt the company long term. 

 

Since the bonds are convertible, couldn't Sony just convert the bonds to stock just before bankruptcy in order to give the existing stockholders more leverage? Or doesn't it work like that?



Soundwave on 14 November 2012

Sony has no chance of touching Samsung in the TV sector, lol.

The market for 4K $5000+ 84 inch screens is a tiny enthusiast niche.

The mass market doesn't want to pay more than $1000-$1500 for a TV anymore, and even that might be stretching it.



fordy on 14 November 2012

Sony should make a successor to the SPC700 and sell it to Nintendo for use in their next gen console (after the Wii U)

Profit!



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Soundwave on 14 November 2012
BuckStud said:
Soundwave said:

Well maybe Nintendo + Sony can come to a deal.

Nintendo buys a small amount of Sony bonds/stock (not 50% or anything like that). 

In the future Nintendo will need a hardware partner if they want to continue making gaming handhelds -- Sony can be that hardware partner as they have a cell phone and tablet division. Eventually I think Nintendo is going to have to accept cell phones and tablets, this is a way for them to do so on their own terms, since they would have a stake in Sony and can be in the driver's seat.

Sony agrees to basically exit the handheld gaming market and jointly work with Nintendo on a future handheld platform which will succeed the 3DS in a few years.

Console side is left untouched for now.

That might be interesting.


The question is, why would Nintendo need Sonys help to make a handheld.  Nintendo has ruled the handheld market since the original Game Boy?  While the PSP did pretty well, it just doesn't make any sense.


I'm operating under the assumption that by the time the next handheld product is good to launch, Nintendo will have to face up to reality and partner with a cell phone/tablet maker. I don't think people en masse will buy a Nintendo-only branded cell phone or tablet, their brand alone is too tied to video games and toys, but I think the standalone gaming handheld is in decline.

So Sony could be a decent partner there. Fellow Japanese company, can also understand what Nintendo talking about when it comes to the game business and even help out once in a while with software (Uncharted, Gran Turismo, LBP, etc.).



Kasz216 on 14 November 2012
fordy said:
Kasz216 said:
Adinnieken said:
Kasz216 said:

I don't think the selling of bonds is so bad, a lot of companies sell bonds.

The distrubing part is that they are zero coupon convertable bonds rather then just regular bonds.

 

Zero coupon bonds are bonds that don't offer any interest payments.  Sony switching to Zero Coupon bonds suggests they're worried about paying interest on more bonds.   As such, Zero Coupon bonds go for much less in auctions.

Sony is offseting this by making them converable... So you can turn them into stock if you want at the end of the period.   Convertable stock basically being a "gamble".  Your stock MAY be worth the $100 note it's in, or if Sony's stock rises up... you may get back $120 worth of shares in Sony stock.

 

To me, it sounds like Sony is afraid to have to pay interest for bonds, but is making their bonds convertable because they are also afraid yields would be too low so that they would have to give away too much money 5 years from now that would break them.

So they are trying to create "Pot Odds" more or less by offering to cut into their own profitability more, if the company turns it around.

 

Suggesting they are very worried they won't have it turned around in five years.

 

EDIT: Also, I beleive it's a bad sign they are avoiding the US Market.  As the US Market tends to be more up/down... which again suggests that they think people won't look on these bonds too favorably.   It reminds me a lot of the various Euro countries that went in debt.

What happens to bonds if the company goes under or is sold?  Are bonds debt and do bond holders have the same clout as stock holders when it comes to bankrupt companies repaying debt?

Bonds are debt.

Bond holders actually have more clout when it comes to being repaid on a Bankruptcy then stockholders do. 

Stockholders are generally last when it comes to Bankruptcy filings.

I don't think Sony will go Bankrupt within 5 years but... they're far unhealthier then I thought.  To me it sounds like Sony is planning to kind of just limp along in the short term and wait for it's oppurtunity to see a big change, but doesn't see such an oppurtunity at the moment.

They would still have options and moves to play to prevent bankruptcy, they're just... bad ones that will hurt the company long term. 

 

Since the bonds are convertible, couldn't Sony just convert the bonds to stock just before bankruptcy in order to give the existing stockholders more leverage? Or doesn't it work like that?


Doesn't work like that.  Convertable bonds are the bondholders choice.   It's something you do to make your bonds more attractive to buyers.

To consider how big this bond sale is... if every bond was exchanged for Sony Shares, it would dilute existing stock by 15.6%.

In otherwords if you bought every bond then cashed it in you'd own 15.6% of the company.

That's why the move is so surprising.



JimmyDanger on 14 November 2012
zuvuyeay said:
are we going full circle and ending up with a guy making dab radios in his shed

of course debt is a problem but it's nothing unusual,not making money is the bad thing,it's quite interesting about the old style and japan like europe are the old empires which are retracting and nowhere to go,japan has lost it's electronic empires now,are there still any giant japanese companies kicking arse out there,toyota?

And if you're making less money that you owe/spend - like Sony has been for the last few years - that problem gets worse.

It's easy to generate turnover operating at a loss. It's generating profit from your turnover that's called success. And that's what we call "making money" otherwise you're "losing money".

Sony has been losing money for a while now.

 



CChaos on 14 November 2012
zuvuyeay said:
are we going full circle and ending up with a guy making dab radios in his shed

of course debt is a problem but it's nothing unusual,not making money is the bad thing,it's quite interesting about the old style and japan like europe are the old empires which are retracting and nowhere to go,japan has lost it's electronic empires now,are there still any giant japanese companies kicking arse out there,toyota?

Actually, yes, kind of! Toshiba, believe it or not.

http://www.hoovers.com/company-information/cs/revenue-financial.Toshiba_Corporation.ebe2542309947e1d.html

They're doing reasonably, but they appear to still be pulling out numbers that are in the black. They're obviously not pulling Samsung numbers, but they're coming along well enough. They're definitely not in Panasonic, Sony and Sharp's level of trouble, by any stretch.



Wh1pL4shL1ve_007 on 14 November 2012
zuvuyeay said:
are we going full circle and ending up with a guy making dab radios in his shed

of course debt is a problem but it's nothing unusual,not making money is the bad thing,it's quite interesting about the old style and japan like europe are the old empires which are retracting and nowhere to go,japan has lost it's electronic empires now,are there still any giant japanese companies kicking arse out there,toyota?


Samsung is kicking Sony's and Panasonic's ass. Samsung is king.... japanese wise. 



Yay!!!