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Thread: Warrants?

  1. #16
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    Quote Originally Posted by mfd View Post
    The market for this should be reasonably efficient, so the pricing should be such that buying warrants doesn't increase your likelihood of profit (otherwise others would have spotted the opportunity and driven the price up). Unless you think you know better than the rest of the market (I certainly don't), you're relying purely on luck for this to work out in your favour. You're most likely just adding unnecessary complication. The other phrase to remember is 'there's no such thing as a free lunch'.
    But their can be hidden gems

  2. #17
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    Quote Originally Posted by justakiwi View Post
    I'm sorry but I'm not getting it. How is this any more risky than me deciding to go buy another 500 shares on Monday at the current market price? I would have thought it was actually less risky. Worst case scenario I waste $62.50 (if I bought 500 warrants and didn't exercise them). Best case scenario I end up with an extra 500 shares at a significantly cheaper price than whatever the market price is on exercise day. If I was talking thousands of warrants then yes, it would be pretty risky, but I honestly don't see a huge risk in what I'm thinking of doing.

    What am I missing
    I dont think you are missing anything - you seem to have analysed the situation reasonably well. On past history the warrants having been converted to shares get rewarded with a good divi though share price doesnt move too much.

  3. #18
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    Looking at Kingfish warrants - exercise date is only 3 months away - estimated at $1.22 - current share price $1.36 - 14c difference

    Thinking of buying a few thousand @ 6 cents - to hopefully double money

    Any fish- hooks ??

  4. #19
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    Thumbs up If that was a real $1000 note someone would already picked it up

    Quote Originally Posted by Not too Flash View Post
    Looking at Kingfish warrants - exercise date is only 3 months away - estimated at $1.22 - current share price $1.36 - 14c difference

    Thinking of buying a few thousand @ 6 cents - to hopefully double money

    Any fish- hooks ??
    This looks too good to be true but the only issue I can see (apart from a possible decline in the NZX and thus KFL) is that in order to realise your gain you may have to front up $1.22 a warrant come May and actually convert to head shares, which you can then sell.

    So you will need ready cash at the time.

    Best Wishes
    Paper Tiger
    om mani peme hum

  5. #20
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    Thumbs down Ignore my previous post & do not act on it

    Dilution - we are probably forgetting about the dilution caused by the warrant to share conversion. Must do some real sums before posting further.

    Best Wishes
    Paper Tiger
    om mani peme hum

  6. #21
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    Thumbs up The final definitive maybe

    Exhibit A:


    The next dividend will lower ALL the NTA row values by the same amount so do not worry about it.
    Otherwise we assume the NTA does not change.

    The current exercise price of a warrant [$1.32 - 8.44c of divvies] is $1.2356, add in you 6c to buy the warrant and your total buy price is effectively $1.2956.

    When those KFLWD all become KFL then the NTA of the KFL drops by
    3c a pop [$1.3853 > $1.3559] and we will assume so does the buy and sell.

    So maybe you can sell for $1.33 what you bought for $1.2956.

    But prices rise and fall and there maybe other stuff involved because I am not up to speed on the KFL fee structure, etc.

    Best Wishes
    Paper Tiger
    om mani peme hum

  7. #22
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    But prices rise and fall and there maybe other stuff involved because I am not up to speed on the KFL fee structure, etc.
    And you will need to make an assumption as to how many warrants will actually get exercised and how many will expire, worthless, in "bottom drawers".


  8. #23
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    Thanks very much for your input - especially from the striped one who have enjoyed reading and has taken sometime to help.
    I note that about 79% converted in 2015 when the difference was 5c so the dilution may not be quite as much as 3c
    Might take a small punt on the warrants as the length of time between stumping up to exercise and the selling may be short

    Cheers

  9. #24
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    Talking Taking the path of least resistance

    Happy to help - I thought it might have been something I could use to make money myself but...

    doing some more sums I do not see that the risk reward ratio particularly stacks up:

    Buying 10,000 KFLWD gives a nominal weighted return on equity employed of 18.5% at $274.89 profit, which is not a lot [and you need another $12,100 for (say) a week in May]

    Buying 170,000 KFLWD and those numbers are 20.7% & $5,132.21 but you would need $205,547 for May and that (for me at least) is awkward.

    If the NTA (and the price you can sell for) goes up over the next three months then you obviously make more .

    But a 3c drop in a realizable sell price and it is break even only .

    So not a game I am going to play but well spotted.

    Best Wishes
    Paper Tiger
    om mani peme hum

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