FTB Warrants

[Dagon]

Am a correct in my calculation that unless I was planning on selling my shares there is no advantages in talking up the early warrant redemption??

Generally no advantage - a disadvantage I believe as you tie up capital unnecessarily.

[beautifulmind]

How does this warrant thing work? If I have 500 warrants does that mean I can purchase/redeem 500 shares at the issue price (I bought when FTB floated). Thanks.

[Dagon]

You can convert your warrants to shares at 50 cents each. You don't have to, you can wait till the original dates. Which is what i'm doing, there is no advantage converting them now unless you are planning to sell your shares before the original redemption dates.

[johna]

What has selling the shares got to do with it? There is no reason to convert the warrants early, unless you want the extra rights that come from the shares (voting? dividend (lol)).

If you want to sell, you may as well just sell the warrants, that will make a lot more money than converting and selling the shares.

[Dagon]

If you sell shares and warrants you pay two lots of brokerage, if you convert the warrants to shares first you dont.

[Paper Tiger]

So you take a warrant worth 23c spend 50c to end up with a share that will fetch 67c, loss 6c a share, $30 brokerage is 500 warrants equivalent. So how many you want to dump?

[Dagon]

you convert your warrents which you paid 0 for in to shares worth $0.67 at a cost of $0.50 with no brokerage making a $0.17 profit on each. Of course if you then see them there is a brookerage

[Paper Tiger]

Dagon

one of us is missing the point here.

If you want to sell more than approx 500 warrants then it is NOT worth converting them to shares first, you end up with less cents in your piggy bank.

Something is worth what others will buy it from you for, not what you bought it at.

If you sell the warrants direct you make 23cents a pop, with less hassle instead of 17cents.

[Dagon]

yeah silly me, i diden't actully look at the numbers as I was not planning on doing it myself.

[Paper Tiger]

quote:Originally posted by Dagon

yeah silly me, i diden't actully look at the numbers as I was not planning on doing it myself.


neither am I, but then I don't own any :D
No worries

[Placebo]

I won't be exercising my warrants early. But nobody seems to have speculated on why the principals want to bring forward the exercise date (with approval from the board). When something like this happens, I get a little suspicious. Should I be?

[spector]

quote:Originally posted by Placebo

I won't be exercising my warrants early. But nobody seems to have speculated on why the principals want to bring forward the exercise date (with approval from the board). When something like this happens, I get a little suspicious. Should I be?


my read on it is that some institution that has a lot of warrants wants to turn them into shares so they can trade them easier... I guess shares tend to be easier to trade as the general public understands what a 'share ' is ... but tend to be confused about what a 'warrant' is. If this is the case then FTB would be obliged to give all the other shareholders the same option to turn their warrants into shares as well.

This is just a reasonable guess of course... but I can't see why else they would do it.. the coffers are full and FTB sales are still on a good growth curve.

My mathmatical ability is not great, but my calculator says i'm better off selling my warrants on the open market rather than converting them to head shares.

[Gryffyn]

my take was that the dirs think they will gain soon by having more full shares...

Disc: FTB but not sure what to do???

[johna]

The only reason to convert the warrants is to get the extra rights that shares have over warrants. There is no financial reason for converting early unless there is something exceptional going to happen.

So, what rights do shares have that warrants don't?

Voting
Dividends
Participation in a rights issue
Bonus shares
Return of capital (voluntary, or liquidation)
Takeover

The curious thing is that most of these scenarios seem unlikely, although on the other hand you have to assume that there is a reason for the early conversion.

[Placebo]

Won't the conversion also dilute the share pool and reduce the value overall?

[craic]

How? The shares cost 50 cents and any new shares from the exercise of warrants cost 50 cents. The company is currently running in the red so more money (from warrants) reduces this, however slightly, and there are more shares to dilute the loss on a per share basis. A profit, and by inference, a dividend is too remote at this point to warrant any sweat. Disc. hold 10,000 and warrants.

[spector]

quote:

Disc: FTB but not sure what to do???


If you want to get rid of all your warrants you're better off selling them on the market rather than converting them (keeping in mind there will be a broker fee involved which needs to be factored in)

But if you want to convert the warrants to head shares then you might as well wait till October when the 'A' warrants mature... no point paying for them now when you pay exactly the same for them 10 months from now and can use the extra money to invest elsewhere.

[Placebo]

Craic: Shares currently trading at c.69c. If warrants are converted (at whatever price), there will be a bigger pool of shares. If demand and market cap stays the same, surely the price of each share must then reduce?

[spector]

quote:Originally posted by Placebo

Craic: Shares currently trading at c.69c. If warrants are converted (at whatever price), there will be a bigger pool of shares. If demand and market cap stays the same, surely the price of each share must then reduce?


...the price of head shares will reduce only when supply exceeds demand... just like in fifth form economics... It doesn't matter how many shares are on the market, if someone thinks they can sell them tomorrow for more than they bought them for today the price will rise.

With the head share trading at 72c now i think it's fair to say that the pool of people wanting FTB has increased over the last year... so the converted warrants will not nesasarily take the head share price lower.

[The Apprentice]

I think the reason they are allowing early conversion is most likely because of requests from small shareholders who brought in the IPO.

These holders will have recieved even smaller amounts of warrants which are uneconomical to trade.

If they were to sell their head shares they would be left with a small number of warrants which would incur a large relative brokerage. They may be wanting to convert so that they can sell out all their holding as head shares incurring just the one brokerage fee.

Theoretically no one should exercise warrants/options until the last possible date they can as they include a time premium for the possible gain they can make in the remaining time until expiration.

[Gryffyn]

The new boy on the block makes sense - Algamation for one easy sale.

[Placebo]

Spector, thanks for the economics lesson. Unfortunately I spent that class fantasising about how great the teacher would look in a bikini, but I get the point. Hence my reference to "if demand and market cap stays the same". i.e. doesn't it follow that the price will drop if demand doesn't rise.... But then, there seems to be good demand at present, and maybe that's another reason why they are allowing an early warrant conversion.

[spector]

quote:Originally posted by Placebo

Spector, thanks for the economics lesson. Unfortunately I spent that class fantasising about how great the teacher would look in a bikini, but I get the point. Hence my reference to "if demand and market cap stays the same". i.e. doesn't it follow that the price will drop if demand doesn't rise.... But then, there seems to be good demand at present, and maybe that's another reason why they are allowing an early warrant conversion.


... i had a maths teacher that was just the same...*sigh*... By the way, I failed both maths and economics so anything I say should be taken with a pinch of salt. Possibly two.

[KJ]

What's behind early conversion?

I think it's a trick that they learnt from DPC who did the same although DPC are paying divs.

IMO-Directors announce that they have been approached by some shareholders interested in exercising warrants early...who would know.

Founding shareholders then announce that they will exercise 647,000 warrants early.Some will say "they must know something that I don't-I better do the same"

In comes the cash which has got to be good for FTB-cheapest money that you can get! Good move.

[spector]

quote:Originally posted by KJ

What's behind early conversion?

I think it's a trick that they learnt from DPC who did the same although DPC are paying divs.

IMO-Directors announce that they have been approached by some shareholders interested in exercising warrants early...who would know.

Founding shareholders then announce that they will exercise 647,000 warrants early.Some will say "they must know something that I don't-I better do the same"

In comes the cash which has got to be good for FTB-cheapest money that you can get! Good move.



you could be right KJ... but they don't seem to need the money at the moment.. so why do it?

[KJ]

They recently raised an additional $3.12m to increase the rate of expansion into the USA.Depending on how well that is going existing cash will be tied up fairly quickly-terms for USA debtors is 120 days.

I don't think that they will ever have too much cash at current rates of expansion.

[spector]

quote:Originally posted by KJ

They recently raised an additional $3.12m to increase the rate of expansion into the USA.Depending on how well that is going existing cash will be tied up fairly quickly-terms for USA debtors is 120 days.

I don't think that they will ever have too much cash at current rates of expansion.


makes sense KJ... the more growth the more short term debt they have to cover..