Jul. 9 at 3:08 PM
$ALVO For anyone who missed it and wondering about the weakness. The
$108 million convertible bond carried a conversion price of
$5.9224, set at a 25% premium over the
$4.7379 reference price. The bond includes a reset provision that kicks in if any equity raise or private placement is done. The most common design for these Nordic/European-style "reset on capital raise" clauses is to re-strike the conversion price at the new offering price plus the original premium — so
$3.75 × 1.25 =
$4.6875. I am betting this is what has been done. These bondholders hedge, which means the reset forced them to short an additional ~3–4 million shares to get back to delta neutral at the lower strike. On top of that, the reset adds roughly 5 million shares of dilution to the
$108 million convert. Overall, I view the added cash as a positive and still believe we see that
$8 gap filled in 2027 but short term, this explains the weakness. As posted, I sold out in the 4s and very slowly buying back.
