Warrants?

[justakiwi]

Trying to get my head around warrants. If I'm understanding it correctly, a company issues free warrants to current shareholders - which they can then exercise at a set later date to purchase ordinary shares at a set (presumably) discounted price? But these warrants can be traded on the open market if the holder doesn't want to exercise them, so the buyer can then exercise them at exercise date?

There are currently Kingfish warrants currently trading for $0.065.

Found some info on them on the Kingfish site as below:

Exercise Price will be $1.32


Adjusted for dividends declared during the period up to the Exercise Date. The final
Exercise Price will be calculated before the Exercise Date, and we will advise you at least 20 days before the Exercise Date.

As an example, if the warrants are allotted on 10 May 2016 and the aggregate amount of the quarterly dividends declared by Kingfish between 10 May 2016 and 5 May 2017 is 10 cents, then the Exercise Price would be $1.22 (i.e. $1.32 less $0.10).


I'm thinking it might not be such a bad idea to buy some. Depending on what the final exercise price is it could be good (and affordable) way to build my holding. Question would be - if I do decide to do this should I buy them now and take the risk they could drop in price between now and exercise date OR should I wait till closer to the time?

Good idea or not?