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

Adinnieken on 14 November 2012
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?



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Kasz216 on 14 November 2012

I don't see why you would buy Sony Stock.

If anything, buy these bonds. It's like owning Sony stock... except if there is no luck, you still get an investment greater then your principal back. (well unless they go under, but if they do, your still better off with bonds then stocks.)



Vinniegambini on 14 November 2012

No buying Sony stock. Me bought Nintendo shares at 14.40$ :) once it hits the 20 mark, sell!!!!!!! Profit :D



TheLastStarFighter on 14 November 2012

Sony is in terrible shape due to excessive debt. They would be a awful investment. This bond sale is a desperate move, and since it means that either cash will be paid out if Sony does poorly or stock given out if Sony does well (causing dilution) no shareholder should be happy about it. Thus, the stock dropped 10% with the announcement.



Kasz216 on 14 November 2012
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. 



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osed125 on 14 November 2012

Kinda funny not seeing any Sony fans on this type of threads (well except a very few). Anyway the situation is getting worse with each passing day. I really hope they manage to turn this around, Sony is a great company and they deserved to stay in business for a long time. 



Nintendo and PC gamer

VicViper on 14 November 2012

In some other thread someone mentioned Google buying Sony

Does this hold any truth?



DirtyP2002 on 14 November 2012
KillerMan said:
DirtyP2002 said:
@killerMan

this is a random post by a forum member who tries to analyse the situatuion and draws conslusions. This is exactly what rating agencies are for. The big players do these reports all the time and draw conclusions. They have way more resources and knowledge than this guy. Their reports are the reason why Sony has to use this bond in the first place, because nobody is bullish on Sony when it comes to rating agencies or investment groups.


it's post made by person that works for finance corporation. Whole post in GAF that deals with outlook for Panasonic, Sharp and Sony.


Do you see what is happening with the shares right now? This is the real world. Investment-experts around the world stop investing in Sony, therefore the stock price hits a 30 year low, burning about 2 billion of market value in the past weeks. Now tell me, how credible is you forum post really?



Imagine not having GamePass on your console...

sales2099 on 14 November 2012
VicViper said:
In some other thread someone mentioned Google buying Sony

Does this hold any truth?

Hell MS can buy Sony if its only worth $12 billion.

You get your entertainment hub for Xbox with Sony music and movies and win the console war in one shot. Scrub the rest/sell them off piece by piece. A man can dream.



Xbox: Best hardware, Game Pass best value, best BC, more 1st party genres and multiplayer titles. 

 

CChaos on 14 November 2012

Well, I think one thing we can all agree on, wholeheartedly, is that the Sony of the future will be a different beast than the Sony of today. It's strange to think about, considering most of us have grown up around Sony products, but this is going to come down to a few very important points that go beyond things like the game division.

1) Can they profit enough in the short term to not only break even, but to break even enough to pay off their mass of debts?
2) What will stay and what will go? Extreme measures require extreme choices. This does mean that they might be forced to kill or sell entire divisions. The death of the Sony TV could still be possible.
3) How are they going to streamline for the future?

At least most people aren't using the infuriating term that 'Sony is too big to fail' any more. Kaz appears awake and I'd bet you good money now that the engineers and executives have put down this 'us vs. them' attitude for the sake of mutual survival. It's not until people start realizing the potential threats that they start working their asses off to prevent it. I think it's safe to say the realizations have kicked now. Now to see what they do about it.