Rob Stevens is the chief executive officer of Isner Construction, 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 firm’s common stock does Mr. Stevens own?
b. If the company decides to call the convertible bonds and force conversion, what percentage of the firm ’ s common stock will Mr. Stevens own? He does not own any convertible bonds.