Dare I respond.. Your example #1 is pretty stra
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Posted On: 02/18/2021 6:48:40 PM
Dare I respond..
Your example #1 is pretty straight forward..buy $10k (4505shares) VERB at $2.22 and sell at $10 (and for comparison can we stipulate all sales are shortly before warrant expiry in three years). Now you own zero stock and pocketed $35k
Example #2 (line
confused me at first. Here you have bought and exercised the 19608 warrants....you now own 19,608 shares worth $10/share for a cost of $3.43 (exercise fee) plus $0.51 (cost basis) so you are ahead on paper $(10-3.94) x 19608........$119,216...not bad especially compared to #1. Remember that one had to come up with the $3.43 for each share at the time of exercise.
Example #3 (line 17) Using the numbers given 19608 warrants were purchased at $0.51 and sold at $6.07. If the warrants weren't exercise the profit would be $(6.07-0.51) x 19608...... $109,020 and that is it....no stock involved and not having to come up with any money. Now you might question who is going to buy the warrant for $6.07 a few days before expiration. Consider $6.07 + $3.43 = $9.50...so one could obtain a $10 stock for 5% off. About right as the warrant seller has $0.51 cost basis in each warrant.
Example #4 (line 26) considers the $10 stock value and the $3.43 exercise fee. In any case using the numbers given one is up a cool $118.8k.
One option not given is to sell enough of the appreciated warrants to pay for the purchase of VERB stock through exercise of the unsold warrants. This way you don't own as many shares but also you don't have to come up with any cash.
All these hypotheticals don't account for tax ramifications which could considerable. (My caveat)
None of this applies directly my earlier post re swapping stock for warrants.
In that example you come up with no new money and of course lose any future appreciation of stock sold. My thinking was based on buying and selling warrants just like one would stock. Of course the warrants are highly leveraged and the multiplier of profit soars as price increases substantially beyond the warrant strike price (if it ever does).
And if I am way off base here (always possible) please PM me so as to not drive everyone else crazy.
Your example #1 is pretty straight forward..buy $10k (4505shares) VERB at $2.22 and sell at $10 (and for comparison can we stipulate all sales are shortly before warrant expiry in three years). Now you own zero stock and pocketed $35k
Example #2 (line
confused me at first. Here you have bought and exercised the 19608 warrants....you now own 19,608 shares worth $10/share for a cost of $3.43 (exercise fee) plus $0.51 (cost basis) so you are ahead on paper $(10-3.94) x 19608........$119,216...not bad especially compared to #1. Remember that one had to come up with the $3.43 for each share at the time of exercise. Example #3 (line 17) Using the numbers given 19608 warrants were purchased at $0.51 and sold at $6.07. If the warrants weren't exercise the profit would be $(6.07-0.51) x 19608...... $109,020 and that is it....no stock involved and not having to come up with any money. Now you might question who is going to buy the warrant for $6.07 a few days before expiration. Consider $6.07 + $3.43 = $9.50...so one could obtain a $10 stock for 5% off. About right as the warrant seller has $0.51 cost basis in each warrant.
Example #4 (line 26) considers the $10 stock value and the $3.43 exercise fee. In any case using the numbers given one is up a cool $118.8k.
One option not given is to sell enough of the appreciated warrants to pay for the purchase of VERB stock through exercise of the unsold warrants. This way you don't own as many shares but also you don't have to come up with any cash.
All these hypotheticals don't account for tax ramifications which could considerable. (My caveat)
None of this applies directly my earlier post re swapping stock for warrants.
In that example you come up with no new money and of course lose any future appreciation of stock sold. My thinking was based on buying and selling warrants just like one would stock. Of course the warrants are highly leveraged and the multiplier of profit soars as price increases substantially beyond the warrant strike price (if it ever does).
And if I am way off base here (always possible) please PM me so as to not drive everyone else crazy.
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