Author Topic: EZPW - EZCorp  (Read 70168 times)

racemize

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Re: EZPW - EZCorp
« Reply #210 on: May 09, 2018, 01:19:54 PM »
The CEO doesn't seem to care about the dilution or the cost.  When I asked him about it, he said, basically, "I don't know why you guys are so worried about this, we're just going to roll it." 

The last one has been so expensive and is the reason I sold.  They will either have to pay a lot of money (in cash or in new debt) or issue a lot of shares.  If the CEO can't figure out $10 a share was a stupid price for a convertible, I just don't know what to say.  The 8% term loans would have been far cheaper.

I would have held this one for a long time, but given these convertibles and the controlling shareholder, I'll forgo the upside.


KJP

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Re: EZPW - EZCorp
« Reply #211 on: May 09, 2018, 02:54:21 PM »
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Does anybody understand why they continue to fund themselves through dilutive convertible bonds? This is not the first time they are using this instrument and like last time, the market is puking on the news. I would expect them to get financing without having to extend convesrion options, so the only way this makes sense to me is that they are trying to redistribute shareholders money to the noteholders - happy to learn of another rationale though.
Also, will be interesting to see who buys the notes...

Has the pricing been disclosed?  Without that, you can't tell how dilutive the converts are (or may be).

racemize

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Re: EZPW - EZCorp
« Reply #212 on: May 09, 2018, 04:51:30 PM »
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Does anybody understand why they continue to fund themselves through dilutive convertible bonds? This is not the first time they are using this instrument and like last time, the market is puking on the news. I would expect them to get financing without having to extend convesrion options, so the only way this makes sense to me is that they are trying to redistribute shareholders money to the noteholders - happy to learn of another rationale though.
Also, will be interesting to see who buys the notes...

Has the pricing been disclosed?  Without that, you can't tell how dilutive the converts are (or may be).

It will be based on today's closing price, if it follows the patterns from before.

ragnarisapirate

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Re: EZPW - EZCorp
« Reply #213 on: May 09, 2018, 07:30:11 PM »
The CEO doesn't seem to care about the dilution or the cost.  When I asked him about it, he said, basically, "I don't know why you guys are so worried about this, we're just going to roll it." 

The last one has been so expensive and is the reason I sold.  They will either have to pay a lot of money (in cash or in new debt) or issue a lot of shares.  If the CEO can't figure out $10 a share was a stupid price for a convertible, I just don't know what to say.  The 8% term loans would have been far cheaper.

I would have held this one for a long time, but given these convertibles and the controlling shareholder, I'll forgo the upside.

Can you go into more detail as to the ceos comments?

KJP

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Sunrider

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Re: EZPW - EZCorp
« Reply #215 on: May 11, 2018, 12:21:41 AM »
$150 million at 2.375%, convertible at $15.90/share.

https://investors.ezcorp.com/investor-news/press-release-details/2018/EZCORP-Announces-Pricing-of-Private-Offering-of-150-Million-of-Convertible-Senior-Notes-Due-2025/default.aspx

Hmmm - unless I read that wrong, it doesn’t seem as bad as the previous one - low rate and convertible at the company’s option, so not forced/inevitable dilution?

lathinker

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Re: EZPW - EZCorp
« Reply #216 on: May 12, 2018, 05:18:44 AM »
 
Quote
The Convertible Notes will mature on May 1, 2025, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. Prior to the close of business on the business day immediately preceding November 1, 2024, the Convertible Notes will be convertible at the option of the holder only upon the occurrence of certain events and during certain periods, and thereafter, at any time prior to the close of business on the business day immediately preceding the maturity date.

The Company, at its option, may redeem for cash all or any portion of the Convertible Notes on or after May 1, 2022, if the last reported sale price of the Company’s Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days, including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Sunrider, this reads like the option will be with the holder and only from May 2022, EZPW can somewhat cap the upside. Not sure how the "certain events"/"certain periods" will be specified in the end, but we have to assume that the convertible-holder will have at least a 4y-option.

I tried to value a 4-year-call here: http://www.fintools.com/resources/online-calculators/options-calcs/options-calculator/
Assuming a stock price of 13.25$, strike price of 15.90$ and 30% volatility, the call value is about 2.70$ per share which is 170$ per 1000$ of convertible notes.
The worst aspect, in my  view, is that the stock price dropped 10% on the convertible announcement, but the reference price they used for the convertible pricing is AFTER that drop. So, they send their stock price south  first and price the dilutive instrument on that cheaper price in step two.

Pricing the call based on the close price just a day earlier would have moved the conversion strike to 17.65 for a 20% premium. Alternatively, you a 15.90$ strike on a 14.70$ stock price give a call value of 3.55$ per share or 224$ per 1000$ of convertible.

I cannot see how this is not an (in my view outrageous) wealth transfer from  shareholders to convertible investors and woukd still be interested to learn how is buying these notes.
At this point, I still  own some EZPW shares but it really feels like racemize's conclusion is the way to go here.


Sunrider

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Re: EZPW - EZCorp
« Reply #217 on: May 13, 2018, 12:33:31 PM »
Quote
The Convertible Notes will mature on May 1, 2025, unless earlier converted, redeemed or repurchased in accordance with their terms prior to such date. Prior to the close of business on the business day immediately preceding November 1, 2024, the Convertible Notes will be convertible at the option of the holder only upon the occurrence of certain events and during certain periods, and thereafter, at any time prior to the close of business on the business day immediately preceding the maturity date.

The Company, at its option, may redeem for cash all or any portion of the Convertible Notes on or after May 1, 2022, if the last reported sale price of the Company’s Class A common stock has been at least 130% of the conversion price then in effect for at least 20 trading days, including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Sunrider, this reads like the option will be with the holder and only from May 2022, EZPW can somewhat cap the upside. Not sure how the "certain events"/"certain periods" will be specified in the end, but we have to assume that the convertible-holder will have at least a 4y-option.

I tried to value a 4-year-call here: http://www.fintools.com/resources/online-calculators/options-calcs/options-calculator/
Assuming a stock price of 13.25$, strike price of 15.90$ and 30% volatility, the call value is about 2.70$ per share which is 170$ per 1000$ of convertible notes.
The worst aspect, in my  view, is that the stock price dropped 10% on the convertible announcement, but the reference price they used for the convertible pricing is AFTER that drop. So, they send their stock price south  first and price the dilutive instrument on that cheaper price in step two.

Pricing the call based on the close price just a day earlier would have moved the conversion strike to 17.65 for a 20% premium. Alternatively, you a 15.90$ strike on a 14.70$ stock price give a call value of 3.55$ per share or 224$ per 1000$ of convertible.

I cannot see how this is not an (in my view outrageous) wealth transfer from  shareholders to convertible investors and woukd still be interested to learn how is buying these notes.
At this point, I still  own some EZPW shares but it really feels like racemize's conclusion is the way to go here.

I only read the first part - see below. I agree not ideal and would want to know who bought them. Maybe the sins of the old management team aren't over with this one.

USTIN, Texas--(BUSINESS WIRE)-- EZCORP, Inc. (NASDAQ: EZPW) (the “Company”), a leading provider of pawn loans in the United States and Latin America, announced today the pricing of its $150 million aggregate principal amount of convertible senior notes due 2025 (the “Convertible Notes”). The Convertible Notes were offered in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Company granted an option to the initial purchaser for up to an additional $22.5 million aggregate principal amount of Convertible Notes. The Convertible Notes will pay interest semiannually at an annual rate of 2.375% and will be convertible into cash, shares of the Company’s Class A Non-Voting Common Stock (“Class A common stock”) or a combination thereof, at the Company’s election, based on the applicable conversion rate at such time. The Convertible Notes have an initial conversion rate of 62.8931 shares of the Class A common stock per $1,000 principal amount of the Convertible Notes (which is equal to an initial conversion price of approximately $15.90 per share of the Company’s Class A common stock), representing an initial conversion premium of approximately 20% above the closing price of $13.25 per share of the Company’s Class A common stock on May 9, 2018. The conversion rate is subject to adjustment in certain circumstances.

KJP

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Re: EZPW - EZCorp
« Reply #218 on: June 11, 2018, 04:40:08 PM »

whistlerbumps

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Re: EZPW - EZCorp
« Reply #219 on: July 11, 2018, 03:52:42 PM »
Seems like they are putting that capital to work.  Would be nice if they told us anything about the size of the deals but good that they are accretive and should be synergistic.