Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of RTI International Metals
So what: The conversion rate and the interest rate paid by the securities will be determined at the time the offer is priced. Convertible securities dilute the ownership of existing common shareholders when they are converted into common shares, so a drop in RTI's stock price on the news should be expected. Because convertible securities typically pay a lower interest rate than nonconvertible bonds, RTI will have lower cash payments to convertible holders than it would with nonconvertible bonds.
Now what: RTI shareholders will be watching to see how the company uses the funds raised by the convertibles, and whether it can generate a return adequate enough to offset the effect of future dilution.
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Fool contributor April Taylor does not own shares of the companies mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.