VANCOUVER, Jan. 10, 2013, 2013 (Canada NewsWire via COMTEX) -- Silver Standard Resources Inc. SSRI -announced today that it has priced its previously announced offering of convertible senior notes due 2033 (the "Notes"). The Company increased the offering to US$250 million from US$200 million.
This debt will be convertible into common stock at $20 per share conversion rate, or will pay a 2.8% annual interest rate.
Why did they do this? They certainly don't need the cash (with $400 million in the bank), and if they need more cash, why not sell some Pretium stock? Or, if they absolutely need cash, then borrow it for the short-term without a conversion into shares.
Initially this won't dilute the stock, but it will over time once the stock trades over $20. The market didn't like it at all, with SSRI shares falling $1.50 over the past two days. In this weak market, any dilution will hurt the stock, and management should know that.
To be blunt, this was not a good decision by the board. I really like this company and I hope management and the board doesn’t screw it up. This is not a good sign. They should not be diluting when they don’t have too.
Note: I still like this stock and recommend it. I think it is perhaps the most undervalued stock for companies with market caps over $1 billion.