The warrant dealI bought my warrants in the week they were listed , relying on information (exercisable price, warrant life) published and sanctioned by TSX. As far as I can remember, TSX has in the past followed good standards in dealing with warrant holderes. One has to hope that they will continue to be fair to warrant holders.
I have only a few shares and therefore have no intereest in getting rid of the warrants; the warrants are my main investment. IMHO, the deal seems to be to my disadvantage for the following reasons:
1. In order to have the same benfits from increases in the price of HBM shares, I now have to come up with the exercisable price of $3.15 for each share. This $3.15 is going to be dead money for three and a half years. The proposed 6% premium probably pays for approximately the interest lost, but not for anything else. The coercive alternative does not pay the cost of the dead money.
2. I will incur early capital gains tax if I exercise warrants, or have to sell something to pay the exercisable price. This would not have happened if I were free to say yes or no to the offer, without being penalized for a "no".
3. No allowance is made for time value. This is unrealistic, as a check of other warrants with similar relationships of stock price, warrant price, and remaining life will show. (E.g, Petrolifera, stock $12.38, exercisable price $4.00, expiry 2009, time value 12% of warrant price, ajusted for multiple warrants). More sophisticated analysis is feasible and would show the same.
4. If the stock takes a big drop , I have a greater sum at risk after the warrant exchange, but my benefits remain the same, (at least until dividends are paid, ... unlikely in the near future)
5. Long ago, in the late 1960's there was an issue involving warrants of a company that, I believe, was called West Canadian Oil and Gas. A takeover was under way, and warrant holders were surprised to learn that the warrants could be cancelled in the event of a takeover. It was all legal, in in fine print, but otherwise unknown. The Financial Post published an editorial about the messy situation, and the warrants were kept alive. Presumably, TSX or somebody else decided that you don't do these things.
Let me know if I have gone wrong with any of the above.