More than Meets the Eye: Convertible Bond Issuers’ Concurrent Transactions

June 22, 2013 Leave a comment

More than Meets the Eye: Convertible Bond Issuers’ Concurrent Transactions

Brian J. Henderson George Washington University – Department of Finance

Bo Zhao George Washington University

June 4, 2013

Abstract: 
In recent years, over 60% of convertible bond issuers conduct concurrent transactions; including share repurchases, call option purchases, warrant sales, seasoned equity offerings, and stock lending program initiations. We show that the determinants of issuers’ choice of concurrent transactions vary; and include controlling earnings dilution, the supply of capital available from convertible arbitrageurs, and investment opportunities. Our results suggest that in the convertible bond market, the influence of capital supply, as measured by flows to convertible arbitrage hedge funds, extends beyond the issuance decision and influences the security design and use of concurrent transactions. Additionally, the announcement effects suggest that concurrent transactions signal managers’ information regarding future earnings.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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