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Post by chang on Jun 2, 2021 3:28:15 GMT
My wife owns two stocks in a local brokerage account; not large amounts, mainly for fun. One of the stocks (which pays no dividend) issued her with three "warrants". These appear to be a right to buy a certain number of shares at a fixed price, which expires on a certain date (two in 2023, one in 2024).
Since the shares pay no dividend, I cannot see any advantage whatsoever in buying the shares before the expiration date (unless she wanted to flip them immediately to pocket the difference between purchase and sales price).
Seems like a fancy way of just floating new shares, unless the company is actually awarding the shares from whatever supply they already own. You have to fill out a form and send it to the company within five days of a specific date (only once each quarter) in order to exercise the option to buy. Again, seems like an unnecessary complication.
The first warrant exercise price is well below the current price; the other two are just slightly below. But again, I can see no advantage to buying them before the expiration date (unless she expected the current trading price to drop, in which case she would sell her existing shares!).
Anybody have experience with this? Am I understanding everything correctly?
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Post by Capital on Jun 2, 2021 9:05:53 GMT
You have a good understanding of warrants. Lucky she owns warrants with value allowing her to purchase shares from the Company at less than FMV. I own some warrants received in a bankruptcy. Warrants allow me to buy shares at $48.85 expiring in 9/2024. The company is no longer SEC reporting and trades around $5 on the pink sheets LOL. These warrants just recently received a trading symbol. I doubt mine will ever have value; but, if they do I can sell the warrants themselves. On a very busy day this stock sells about 100 shares. I own warrants to buy about 800 shares. I don't want to risk owning the shares.
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Post by chang on Jun 2, 2021 11:37:03 GMT
Well the right to buy shares at more than FMV wouldn't be worth much....
(A long time ago, my company gave me stock options. These are basically the same thing. At that time I could have exercised the options and sold the stock at a profit. But I waited ... and the stock price fell ... and I waited ... and the stock price fell ... and I waited ... and the options expired worthless.)
Her warrants actually do trade. As you'd expect, the price would be more or less equal to the current share price minus the exercise price. So it might make as much sense for her to just sell the warrants as it would be to exercise them. It seems that more paperwork is involved to actually exercise them. But we're in no hurry.
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Post by Capital on Jun 9, 2021 18:12:29 GMT
Update on my Warrants. Someone just paid me $9.07 for my warrants. Money I thought I would never see. When I sold the stock was trading at $6.01 and the exercise price was $48.85 expiring 09/24/2024. I'm going to add a few dollars to the $9.07 and buy a six pack to celebrate
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