No. of Recommendations: 12
Hi Kevin2017.

Thanks for your kind words.

In the past, if I recall correctly, Saul has called bonds "certificates of confiscation". Therefore, I'm pretty sure that an in-depth discussion of convertible bonds is "off topic" here. But I will reply quickly.

The example you offer seems to have a fixed conversion rate. In that case, yes, the bondholder looking to convert would want a higher share price. I still haven't read Alteryx's Indenture document (and still would prefer not to), but the 10-K clearly indicates that Alteryx's convertible debt does not have a fixed conversion rate. When CFO Rubin answered my question about the the worst-case conversion rate, he indicated that the future AYX share price was a factor in determining the conversion rate. He didn't indicate whether a higher or lower share price would drive higher dilution.

I could not find the Risk Factor that I remembered reading. My best guess is that I was reading the Risk Factors associated with the convertible debt and that's when I remembered what had happened a few years ago with a FUD attack on one of my holdings to drive the share price down. There was speculation at the time that the attack occurred in order to gain leverage in a convertible debt situation. In that case, I had read the Indenture document (perhaps the root of my aversion) and it made sense to me that a lower share price -- a temporarily lower share price, as I indicated before -- would be beneficial to a debtholder looking to convert; they would get more shares. I will leave it at that because I haven't read Alteryx's Indenture document and the conversion terms could be -- and probably are -- very different than the ones in the document I did read. Regardless of conversion terms, FUD attacks have become part of today's investment landscape and companies with high-flying share prices are especially prone. All I'm saying is that we should be on the lookout and that the convertible debt might increase the likelihood of a FUD attack. I hope that helps and hasn't taken us too far into the weeds.

Thanks for your kind words too, 2100STJ. Please remember, though, that the ideas behind all but one of the questions were generated by board participants here, not by me. And, yes, my ULTA experience has been, shall we say, beautiful.

I should add that attending an annual shareholder meeting is a good way to get a better feel for the management team running the company of which you are a part owner. I recommend attending them if it is at all feasible. They are often early enough in the morning that it might not make you late for work, depending on your situation. Since we all benefit when we share information, I encourage anyone with an inclination to try to attend one and write it up for this board. Yes, I spent a lot of time preparing. That's how I roll. I feel as if the more prepared I am, the deeper the insights I'll gather. But there's no requirement that you mimic my preparation before attending one of these meetings. Go as you are, observe what you observe, and share with the community.

Fool on!
Thanks, and best wishes,
TMFDatabaseBob (long: AYX, ULTA)
See my holdings here:
Peace on Earth

Please note: I am not a member of any newsletter team. My opinions are my own and do not necessarily reflect those of the TMF advisers. I want to share my research with you since we’re all part of the larger TMF Community.
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