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This formula is not sufficient in cases when performing a convertible, post-liquidation return because:
The pre-conversion shares have a cost based on the shares and buy price of the convert from fund, but,
The proceeds are based on the sell price of the convert to fund.
During the post-liquidation process for calculating PROCEEDS for pre-conversion shares, you multiply the share balance by a conversion ratio.
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This process is shown below in the following figure.
Based on this example, you can see that there are 2 lots of pre-conversion shares based on the convert from NAV stream (which is around $10):
100 shares bought at $10
.6863 shares bought at $10.20
The issue is that on conversion date everything is put into terms of the convert to fund which has a NAV around $50. If you apply the standard formula for proceeds (shrs x sell price), you multiply 100 shares x $50 and derive proceeds of $5000. By adjusting the pre-conversion shares (100 * .221739), Eagle effectively adjusts the share balance to be in terms of the convert from fund.
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