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Virtus Diversified Income & Convertible Fund V.ACV.P


Primary Symbol: ACV

Virtus Diversified Income & Convertible Fund (the Fund) is a diversified, closed-end management investment company. The Fund's investment objective is to provide a total return through a combination of current income, current gains, and long-term capital appreciation. The Fund will normally invest at least 80% of its net assets (plus any borrowings for investment purposes) in a diversified portfolio of convertible securities, income-producing equity securities, income-producing debt, and other instruments of varying maturities, of which at least 50% of total managed assets are invested in convertibles. The Fund has the latitude to write covered call options on the stocks held in the equity portion. The Fund's investment advisor is Virtus Investment Advisers, Inc.


NYSE:ACV - Post by User

Comment by eljoroon Jan 07, 2018 9:46am
33 Views
Post# 27300071

RE:RE:RE:RE:RE:RE:Holistic Choice Pet Food???

RE:RE:RE:RE:RE:RE:Holistic Choice Pet Food???Basically the price of the warrant is intrinsically tied to the price of the common share.

When a company is on an upward trajectory for growth (revenues, EPS, whatever, etc) one can make an argument that it is likely that the share price will be higher than it currenty trades at any point in time, and therefore the warrant will have a time value that increases the farther away from expiry (when it's final value or strike price will be determined).

As you get closer to the warrant expiry date there is less wiggle room for the company to execute strategy to potentially result in an increased share price, and therefore the time value of the warrant will decrease the closer you get to the expiry date.

The ACTUAL value of the warrant is always relative to the current common share trade price but you need to think of the time value as a PREMIUM to the share price that decreases as the time premium shortens to expiry.

This is why you will see some companies with languishing share prices (see many miners) with warrants that are far from being in the money and go lower as they approach expiry even if the commons simply languish. As those warrants get closer to expiry increasingly they appear to be worthless because the company is running out of time to raise the value of the common shares.

In Greenspace's case the company revenue projections are strong, their new acquisitions will add revenue and EPS at a likely fast pace and there is always a potential they will be taken out by a bigger player. The warrants don't expire for another 14 months so it is reasonable to project that at any time in the next 14 months the shsre price will be higher and therefore the warrants have the potentiall to be many more times higher.

Also, at expiry companies typically like the warrants to be in the money because it means many holders will purchases shares at the strike price (in this case $1.20), which means extra money for the company coffers without having to go to market for a PP or bought deal. So there is extra incentive for them to work hard to get the share price well over $1.60 (warrants were issued at .40 with a $1.20 strike price) by expiry. Many insiders hold a bunch of warrants too and would likely exercise their warrants if they are in the money.

Hope this helps,
El Joro


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