, Columnist
Crashing Solar's Convertible
Plunging stock prices make them look increasingly like debt.
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Convertibles are cool in the sunshine but little more than bathtubs with wing mirrors when it rains (yes, you can put that roof up, but then it's just a boring, regular set of wheels). And what’s true for cars also holds true for bonds -- particularly when sunshine is your business.
"Converts" are attractive to firms that burn cash but are fast-growing. They pay coupons like traditional bonds or preferred shares but can also be converted into common stock in the company at some point. Issuers like them because they get treated more like equity by credit rating providers. Buyers like them because they offer a yield and the promise of big gains down the road -- provided the share price rises enough to make converting worthwhile.