Actually, holder has the right to exchange in Sep09. See page 3 of prospectus. So step up is not an issue.
Your 50 cent level is in fact a cap at 4:1 ratio (2.05/4); But when you actually do a model on a spreadsheet, the payout is positive between 8 cents a share and $1.90 (using a hedge ratio of 87% TIM CFD to TIMPB); Maximum return is actually 101.2% if TIM=50 cents in Sep09.
I have spent a lot of time analysing this and I can only reason that there is in fact an anomaly. TIMPB is complicated and people who buy TIM may not even watch TIMPB. Plus I acknowledge not everybody uses CFD market. So you are right perhaps when you say the trade is too complicated. I am semi literate in financial stuff and it tokk me hours to work this out. Most buyers of TIM could not be bothered. I was just wondering whether I was right and I now am convinced I am.
The only worry you mention is the point that we may be locked in. But there is no step up and holders can indeed get out on reset date.
TIM Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
