Wolverine ECD happy meal
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Happy meal dealWolverine investment
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Bond notional316,250,000Bonds26,000,000
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Stock price $72.00Years held3.50
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Conversion price$91.80Interest payments (total)2,730,000
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Shares underlying3,444,989Capital loss on bonds (per WSJ)14,000,000
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Hedge shares sold in initial offering2,723,300
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Delta79.05%At delta (correct-ish)At 100% short (wrong)
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Hedge shares per $1,000 of bonds8.61Initial short sale223,892283,224
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Interest3.00%Proceeds of initial short sale16,120,21420,392,157
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Assuming static hedge
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Final price of stock at year-end 2011$0.20
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Profits on stock16,075,43520,335,512
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Profits on interest2,730,0002,730,000
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Capital loss on bonds(14,000,000)(14,000,000)
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Net profit4,805,4359,065,512
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Percent return18.48%34.87%
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Annualized4.96%8.92%
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Assuming dynamic hedge / lazy math
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"Average" price of repurchases$36.10
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Profits on stock8,037,718
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Profits on interest2,730,000
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Capital loss on bonds(14,000,000)
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Net profit(3,232,282)
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Percent return-12.43%
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Annualized-3.72%
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