"The good news is, if you have a problem exercise
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Posted On: 04/18/2019 11:15:03 AM
"The good news is, if you have a problem exercise them 5 years from now because of lack of cash, it's a good problem to have."
Lack of cash shouldn't be a problem. All you really need is $344 to get the ball rolling. You would have to exercise the warrants Incrementally.
Let's say you have 1000 warrants and the pps is now $10 at time of exercising.
You exercise 100 warrants with the $344. This will give you 100 VERB shares valued at $1000 (100x$10.) You could sell those 100 shares and use the $1000 to exercise 290 more warrant (1000/3.44=290) and now have 290 shares valued at $2900. So, at this point, you only need to exercise 610 (1000 -100 -290 = 610) remaining warrants for a total of about $2100. So you would only have to use $2100 of the $2900 to exercise the remaining 610 warrants. So now end up with 610 shares valued at $6100 plus $800 ($2900 -$ 2100) in cash.
However, if done in a taxable account, the one problem with above is that you would be creating a taxable capital gain of about $1902 on the selling of the 290 shares: $10 - $3.44 = $6.56 (gains) x 290 shares = $1902 total gains. The $800 in cash should be enough to pay the tax. Of course there would be some adjustment for the cost of the warrants themselves. You could also probably tweak these some.
In an IRA, tax free baby!
Don't take my math, I am an old man, so do your own calculations!
Let me know if I am thinking clearly.
Lack of cash shouldn't be a problem. All you really need is $344 to get the ball rolling. You would have to exercise the warrants Incrementally.
Let's say you have 1000 warrants and the pps is now $10 at time of exercising.
You exercise 100 warrants with the $344. This will give you 100 VERB shares valued at $1000 (100x$10.) You could sell those 100 shares and use the $1000 to exercise 290 more warrant (1000/3.44=290) and now have 290 shares valued at $2900. So, at this point, you only need to exercise 610 (1000 -100 -290 = 610) remaining warrants for a total of about $2100. So you would only have to use $2100 of the $2900 to exercise the remaining 610 warrants. So now end up with 610 shares valued at $6100 plus $800 ($2900 -$ 2100) in cash.
However, if done in a taxable account, the one problem with above is that you would be creating a taxable capital gain of about $1902 on the selling of the 290 shares: $10 - $3.44 = $6.56 (gains) x 290 shares = $1902 total gains. The $800 in cash should be enough to pay the tax. Of course there would be some adjustment for the cost of the warrants themselves. You could also probably tweak these some.
In an IRA, tax free baby!
Don't take my math, I am an old man, so do your own calculations!
Let me know if I am thinking clearly.
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