Mega Brands Inc MBLKF

What reverse stock split means to warrants?

[newguy31]

Can anyone explain to me what the strike price of the warrants would be with a reverse stock split? 

Right now if the stock does to 1.00, the warrants are valued at about 50 cents, if it goes to $1.50, they are at about 1.00 value.

But what happens after the reverse split?

How would this affect the warrant values long term? and at different dollar amounts over the next few years?

Thanks alot

[Nununzac]

A reverse split is always expressed in a ratio. A reverse split 10:1 means for every 10 actual shares, they will issue a 1 new share. So if you possess 100,000 shares and MB does a RS 10:1, you will have your 100,000 "taken back" and 10,000 new shares at 10 times the price will be "given back to you". That is the theory.The problem is this : suppose you bought 100,000 at 50

[nerzaa]

the value of ur investment remains the same for both shares and warrants.after r/s, ur 10 shares become 1, and share price goes from 0.5 to 5.0.same idea with warrant, 10 warrants becomes 1, and strike price changes from 0.5 to 5.0; and current value of 0.26 changes to 2.6; so if you own 10 warrants at 0.26, that's worth 10x0.26 = 2.6 before, and 1 x 2.6 = 2.6 after.

[newguy31]

Ok so what would the excise price or strike price be of the warrant afterwards?  If definately wouldn't stay at 50 cents.  Would it be $5.00?If the 10:1 RS happened right now, MB is trading at 57 cents, it would go to $5.70The warrants are at 26 cents, they would go to $2.60?  With an excise price of $5.00, if the stock is trading at $5.70, the value of the warrants would drop

[nerzaa]

to newguy31.the current share is trading at 57 cents, but warrant is not trading at 7 cents, isn't it? this is ur missing link.

[newguy31]

No.  As the value of MB rises, and the warrant goes in the money, it will eventually trade at about a 50 cent lower value than the stock.Some examples of this are:ML trades at 3.23, ML.WT.A has an excise price of $1, and trades at 2.24Brk.un is at 2.72, Brk.WT has an excise price of $1, and trades at 1.72CWB is at 25.14, CWB.WT has an excise price of $14, and trades at 11.30As to why MB.WT is

[Nununzac]

What happens to warrant is simple: " An adjustment will be made to the Company’s stock options and warrants based onthe split ratio. Warrant holders do not need to submit their warrants for exchange. Theadjustment will be made automatically. The number of shares of common stock issued subjectto stock options, warrants, or convertible securities will automatically be

[wrighton]

One more comment on this, to try to simplify.Suppose you now hold 100 warrants with a strike price of .50  and the share price is $1.50.  You can buy 100 shares for $50, and you will now have $150 worth of shares.  After a split or reverse split, the number of warrants normally does not change.  What changes is what you can do with them.  In the case of a 10:1 reverse

[tonygtx]

I was hoping maybe they would'nt do it but after looking into it further insiders own 80% of this stock so it will happen..they will make a chit load off options when they do it and turn around and dump it

[wrighton]

tonygtx:"I was hoping maybe they would'nt do it but after looking into it furtherinsiders own 80% of this stock so it will happen..they will make a chitload off options when they do it and turn around and dump it"Sorry I don't understand your reasoning.  Reverse split or not, total value of warrants should not change, other than that, as mentioned previously, often share

[tonygtx]

I was looking at their deal with Fairfax....maybe your right....any guesses when they will do the RS??

[navigator11]

With regards to the reverse split (RS), tonygtx, they do not, as you have stated, need to complete such a thing before June 11 2011.  I am reading the documentation as I write, and it clearly states that with shareholder approval, they have the option, not the obligation to complete such a transaction.  If they don't get it done by that date, then they will need to get shareholder

[tonygtx]

Well all i know is that they approved it......nothing like a good mystery if they will do it or not then...will keep all investors on their toes then...;).