1. All ordinary investors who participate in the subscription and purchase transactions of convertible corporate bonds (hereinafter referred to as convertible bonds) issued to unspecified objects through our company since October 26, 2020, All investors must sign the "Risk Disclosure Statement for Investment in Convertible Corporate Bonds Issued to Unspecified Objects" (hereinafter referred to as the "Risk Disclosure Statement") in paper or electronic form and open their authority. Professional investors who meet the conditions stipulated in the "Measures for the Suitability Management of Securities and Futures Investors" (including Category II and Category III professional investors within the validity period) do not need to sign a "Risk Disclosure Letter" and activate this authority, and can directly make transferable investments. Debt related transactions.
2. Starting from October 26, 2020, ordinary investors who have not signed the "Risk Disclosure Statement" cannot subscribe or buy convertible bonds through our company and already hold relevant convertible bonds. Investors can choose to continue holding, convert shares, sell back or sell.
Convertible Bond Investment:
Convertible Bond, the full name of convertible corporate bonds, originated in the United States in 1843. It refers to corporate bonds issued by the issuer in accordance with legal procedures and can be converted into shares within a certain period of time according to agreed conditions. That is to say, convertible bonds are a kind of corporate bonds, and investors have the right to convert them into a certain number of ordinary shares of the bond-issuing company (hereinafter referred to as benchmark stocks) according to a certain proportion and corresponding conditions within a specified period. Therefore, a convertible bond is a bond with rights, which not only contains the characteristics of ordinary bonds, with a series of factors such as face value, interest rate, term, etc.; it also includes equity characteristics, and it can be converted into benchmark stocks under certain conditions; at the same time , which also has derivative characteristics of the benchmark stock.
Investment value:
As a hybrid security, the value of convertible bonds is affected by many aspects. The investment value of convertible bonds mainly lies in the value of the bond itself and the conversion value. The value of the bond itself is the guaranteed return of the convertible bond, which depends on the comparison between the coupon rate and the market interest rate, as well as the face value of the bond. Since the interest income of convertible bonds is established, the cash flow discount method can be used to determine the value of the bond itself. The key to its valuation is the determination of the discount rate. The conversion value is also called the call option value, that is, it gives investors the right to convert into the benchmark stock when the benchmark stock rises to a certain price, which is reflected in the conversion income of the convertible bond. The value depends on the comparison between the conversion price and the market price of the benchmark stock, as well as the company's future profitability and development prospects. The conversion value generally adopts the binary tree pricing method, that is, first taking the issuance date as the base point, simulating the possible price of the benchmark stock and its probability on the starting date of the conversion, then determining the option value under various possible prices, and finally calculating the expected value of the option value and Obtained by discounting. In addition, the investment value of convertible bonds is also affected by its conversion period, redemption conditions, sell-back conditions and downward revision terms of the conversion price.
Generally speaking, the value of the bond itself will be lower than the market price of convertible bonds. The difference is the bond premium, which is the cost investors pay for the right to convert convertible bonds into stocks in the future. The return from this right is uncertain and determined by the future movement of the benchmark stock. The bond premium is a measure of the higher risk associated with investing in convertible bonds than investing in similar corporate bonds. The higher the bond premium, the greater the losses that convertible bonds may face in the future. The conversion value will not be higher than the market price of convertible bonds (the difference is called the conversion premium). Otherwise, investors can obtain risk-free arbitrage by simply buying convertible bonds - converting them into stocks - and selling stocks. income. The conversion premium is a measure of the chance that a convertible bond will profit in the future by converting into shares and selling it. The greater the conversion premium, the smaller the chance of convertible bonds benefiting from converting into shares, and vice versa.
By comparing the investment value of convertible bonds with the market price, we can determine whether the convertible bonds have investment value and decide whether to sell or buy convertible bonds.