Convertible Bonds Look Combustible as Twitter to Tesla Slump
- Nearly half of outstanding tech bonds are ‘out of the money’
- Recent decline in sector has reduced likelihood of conversion
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They may have saved Amazon.com Inc. from the dot-com bust, but for many young tech firms convertible bonds could turn into more of a headache than helping hand.
Twitter Inc. bonds are now among of convertibles that are “out of the money,” meaning the stock is trading below the threshold needed to turn the debt securities into equity, according to data compiled by Bloomberg. As the rally that pushed U.S. technology heavyweights to the sky shows cracks, the possibility of further declines could force even more convertibles into the out-of-the-money club.