Evaluating Convertibles as an Investment and Financing Instrument Against the Backdrop of the Current Situation in the German Capital Market
01.09.2004
Diploma paper by Markus Schmidt, September 2004
At the faculty 'Finance' at the Private Fachhochschule für Wirtschaft und Technik (FHWT) , Vechta / Diepholz
The objective of this paper is to show the advantages and disadvantages of convertibles from the perspective of companies and investors and to evaluate their use based on the economic conditions prevailing at mid-year 2004.
View / download paper (PDF / German / 103 pages / 2.4 MB) |
1. Objective
The objective of this paper is to show the advantages and disadvantages of convertibles from the perspective of companies and investors and to evaluate their use based on the economic conditions prevailing at mid-year 2004.
2. Structure
The first two chapters of the paper describe the most common forms of convertibles and their typical characteristics.
The third chapter starts with a detailed presentation of the most popular features of convertibles. This is followed by an explanation of the possible motives for issuing convertibles. Then after a review of the key legal aspects, the potential disadvantages from the perspective of the company are examined.
The fourth chapter looks at convertibles from the viewpoint of investors. After detailing possible investor motives for buying convertibles, the chapter examines the price behavior of convertibles over their lifespan. This is followed by a general overview of the tax aspects relevant to investors. The chapter concludes by assessing the possible risks from the viewpoint of investors.
The fifth chapter considers the current situation in the German capital market. After showing the trend of selected economic data, the chapter provides an overview of the current market environment for stocks and bonds. This lays the foundation for the subsequent evaluation of the current market environment from the perspective of potential issuers of and investors in convertibles.
The sixth chapter concludes this paper by giving a summary assessment of the main points.