TSX:EIT.PR.A - Post by User
Comment by
OptsyEagleon Feb 21, 2011 7:32pm
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Post# 18170728
RE: RE: Warrants Offering
RE: RE: Warrants OfferingIf you had $1,500 you could get the return on 100 shares if you buy the EIT.UN.
If you had $1,500 you could get the return on 7,500 shares if you buy the warrants.
Obviously the downside risk is greater with the warrants but you can simply scale down your purchases to deal with that.
Another way to look at it is if you take the above and the stock goes to $16.50, or 10% above current prices. The shares give you a gain of 10% plus dividends, however the warrants would be $16.50-$15.27=$1.23/0.20 = 515% gain.
If the shares go to $13.50 the shares lose 10% minus the dividends received and the warrants lose 100%.
With all this considered, the warrants trade at
.20. Personally I think the warrants are undervalued. I suppose this is because most people who own them, will want to sell them, and since they are such a small amount of value, those sellers are less concerned with price. That always makes for an undervalued security.