$ZHIPU This plunge by Zhipu is a bit troublesome—the trouble is that for the $3.0 billion convertible bonds, the company is definitely hoping for full conversion and not repayment. Most likely, the money has already been spent.
Next year, those bonds will mature in September. Here, they will require the company’s stock price to return to 825 or 1130 before maturity. That is 130% of the stock price. Once it hits that level, the company has the right to redeem the bonds in full, effectively forcing conversion!
So, starting from today’s stock price, how much does it need to rise?
It’s essentially betting all its chips on its next-generation model—burning money and betting on commercialization, and whether it successfully raises a new Series A round.
Let’s see how the market reacts. Refinancing with new debt to pay off old debt is also an option, but that brings us back to the old problem: how the market will price the dilution of a large-model company’s equity.
My core reason for being long is that the business model of a large-model company is workable, and I do recognize Zhipu’s marketing. But the money burning is also the most severe. I also didn’t expect them to do a share placement so quickly.
Until there’s no result yet, there’s also no reason to give up and stop-loss just based on the current stock price. Let’s wait and see over the next one or two quarters.
As for adding more or averaging down, I don’t really recommend it at this stage.
Next year, those bonds will mature in September. Here, they will require the company’s stock price to return to 825 or 1130 before maturity. That is 130% of the stock price. Once it hits that level, the company has the right to redeem the bonds in full, effectively forcing conversion!
So, starting from today’s stock price, how much does it need to rise?
It’s essentially betting all its chips on its next-generation model—burning money and betting on commercialization, and whether it successfully raises a new Series A round.
Let’s see how the market reacts. Refinancing with new debt to pay off old debt is also an option, but that brings us back to the old problem: how the market will price the dilution of a large-model company’s equity.
My core reason for being long is that the business model of a large-model company is workable, and I do recognize Zhipu’s marketing. But the money burning is also the most severe. I also didn’t expect them to do a share placement so quickly.
Until there’s no result yet, there’s also no reason to give up and stop-loss just based on the current stock price. Let’s wait and see over the next one or two quarters.
As for adding more or averaging down, I don’t really recommend it at this stage.