Mr. Goldston is Chief executive officer of Omega Airlines Inc. and owns 950,000

Question

Mr. Goldston is Chief executive officer of Omega Airlines Inc. and owns 950,000 shares of stock. The company currently has 6 million shares of stock and convertible bonds with a face value of $ 40 million outstanding. The convertible bonds have a conversion price of $ 38, and the stock is currently selling for $ 45.

a) What percentage of the firms common stock does Mr. Goldston own? b) If the company decides to call the convertible bonds and force conversion, what percentage of the firm’s common stock will Mr. Goldston own?

Explanation / Answer

a) % firm stock before convertion 15.83% 950000/6000000 Stocks after conversion: = 6 million+$40 million÷$38 = 7,052,632 b) % firm stock after convertion 13.47% 950000/7052632

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