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This post was written by Minyanville contributor Bill Feingold.
With SanDisk (NASDAQ: SNDK) -- which turned down a $26 per share bid from Samsung last fall -- now talking about raising equity at well below half that price, I think shareholders are going to be beyond irate. In what appears to be one of the great breaches of fiduciary duty of all time, management belittled Samsung for being opportunistic, trying to take advantage of a depressed stock price.
Funny, I thought that once you go public, you have made a deal that you are willing to accept the market's opinion of your value. I guess Sandisk's management somehow acquired immunity and forgot to tell everyone else.
But there is an interesting way to play this situation. If you think SanDisk's revelation is going to bring back Samsung at a much lower price (and it certainly could), you might want to take a look at SanDisk's 1% convertibles, which were slightly above 50% of par yesterday. In a cash takeover, the bonds will go to par. If the company instead goes ahead with an equity offering, even though the stock will be knocked down (as it has been this morning), the balance sheet will be stronger and the bonds more credit worthy. They come due in 2013.
The CUSIP is 80004CAC5 if you want to give your broker a call.
The CUSIP is 80004CAC5 if you want to give your broker a call.
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