Re:Milly started bashing alreadyRocksolid's post:
https://www.stockhouse.ca/bullboards/viewmessage.asp?no=16623225&t=0&all=0&TableID=0
BEER,
I expected allbusiness might not undertand that warrants have a value, I thought you might be more familiar with warrants than that -even if you have trouble accepting that warrants given to a PR firm is an expense.
So you deem that the "real world way of actually figuring out how these things are transacted" is to say out of the money warrants are worthless. It certainly meets your requirements in this discussion - but it gets shot down in "the real world". Your calculation is very simple the strike price exceeds the current market price, therefore the warrant is worthless. The thing you've disregarded is the time value of money, and the fact that you must consider the option period attached to the warrant. Your simplistic approach would rule out values on options, commodity futures, warrants and a number of other financial instruments and procedures. You see, while you may be able to purchase LBE at $2.30 now, without a warrant - you don't have the option to buy it at a fixed price of $5.35 a year from now - and that's worth something. You may think that option to purchase is worthless when the instrument is out of the money - but you'd be in a substantial minority. Warrants that are out of the money are regularly traded on the market - people are paying for something deemed worthless by you. Companies, including ISM, attach out of the money warrants to a share issue to attract investors - they don't think they are worthless. If you happened to have warrants in a company that expired a year from now, and the company was not bankrupt - would you shred the warrants? Would you give them away for free? Even to make a point in an argument?
If you have never traded warrants, you may not have realized that they trade out of the money - its quite common. The other thing you'd notice is that they don't necessarily move lock step with the share value - because of their nature of a fixed price option, time value of money, etc. You would find that your decision to declare them worthless because they were out of the money, would be met with glee by a number of investors who would be most willing to take them off your hands - in fact there'd be a little bidding war to try and force some cash on you in return for the warrants.
You're right, I did mean the warrants were valued at $2.02, not units. But I did mean $2.02 per warrant [$1.01 for the half warrant]
But you're wrong, if you think I'm going to accept your rationale that out of the money warrants are worthless, because you deem they are - not when your theory is clearly shot down by a multitude of traders, transacting billions of dollars over the years buying and selling out of the money warrants - and by thousands of companies and investors who place a value on them in equity issues. That dog of your's don't hunt, BEER.