Why C warrant holders sell common shares. Suppo
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Posted On: 11/12/2019 1:24:28 PM
Why C warrant holders sell common shares.
Suppose you're holding 5 common shares valued 1.50 and you have 0.5 in cash.
If Cydy goes broke all that's left is 0.5 cash.
Suppose you can buy the C preferred shares at 0.5 each.
You don't want or can't increase your risk in Cydy.
Here is what you do: you sell your 5 common shares, that's 1.50.
Then buy 4 pref. shares for 2.00.
As each pref. share comes with a warrant to buy 1.25 common share at 0.3 you're still holding a position in 5 common shares.
AND you have the right to convert 4 pref shares into 4 common shares.
Ergo, if things go well you have a position in 9 common shares
AND as long as you don't convert you'll get 0.2 dividend yearly (that's not bad for putting 0.5 extra cash into an investment).
Downside? Well, suppose Cydy goes broke, worst case would be you would have lost an extra 50 cents. But, if the science is great, chances are you'll get your 2.00 investment back (common shareholders? maybe/probably nothing).
Anyway, this kind of equity raising is too good to be true. But it is true and good but not for us current shareholders but for the new C pref shareholders of course.
Why is it we "give" these presents to new investors?
Because there is such a great deal just around the corner?
Because BP will be begging us to partner soon?
You tell me.
Suppose you're holding 5 common shares valued 1.50 and you have 0.5 in cash.
If Cydy goes broke all that's left is 0.5 cash.
Suppose you can buy the C preferred shares at 0.5 each.
You don't want or can't increase your risk in Cydy.
Here is what you do: you sell your 5 common shares, that's 1.50.
Then buy 4 pref. shares for 2.00.
As each pref. share comes with a warrant to buy 1.25 common share at 0.3 you're still holding a position in 5 common shares.
AND you have the right to convert 4 pref shares into 4 common shares.
Ergo, if things go well you have a position in 9 common shares
AND as long as you don't convert you'll get 0.2 dividend yearly (that's not bad for putting 0.5 extra cash into an investment).
Downside? Well, suppose Cydy goes broke, worst case would be you would have lost an extra 50 cents. But, if the science is great, chances are you'll get your 2.00 investment back (common shareholders? maybe/probably nothing).
Anyway, this kind of equity raising is too good to be true. But it is true and good but not for us current shareholders but for the new C pref shareholders of course.
Why is it we "give" these presents to new investors?
Because there is such a great deal just around the corner?
Because BP will be begging us to partner soon?
You tell me.
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