Athabasca Oil Corp T.ATH

Bond holders locking in their profits on warrants

[PUNJABI]

Management should not have issued warrants > Big blunder, dilutive and not shareholder-friendly.

"Athabasca Oil Corp. has arranged a private placement offering of 350,000 units. Each unit will consist of $1,000 principal amount of senior secured second lien notes due 2026 which bear interest at 9.75 per cent per annum and one five-year warrant to purchase 227 common shares at an exercise price of 94.41 cents per warrant share (representing the five-day volume-weighted average trading price of the company's common shares on the Toronto Stock Exchange ended Oct. 6):

The average selling price for the new large short position was $1.27 the noteholders shorted the shares and locked in their profit on warrants at an exercise price of 94.41 cents. and will also earn a very fat interest of 9.75%. Noteholders are making a killing and this is thanks to the management. I have seen this in the past too where companies are very desperate or have poor management that allows this kind of situation where they are paying big interest and at this same time allowing risk-free profit-taking on warrants. 

On Friday there was huge volume and the stock tanked there is a chance that the short may have increased. We will find in that in the next report.

[BobTheKnob2]

Question. Doesn't state here, but do the warrants have a callable clause (i.e. if the share price trades for $X and above for 20 consecutive trading days, the warrants become exercisable on 30 days notice - or something to that effect)?

[Maxmoe]

Good question and I would be very surprised if Ath negotiated a use them or lose them short fuse trigger not because they wouldn't think of it, or try it, but no way the bond buyers would settle for that. In a year or two mgmt will have a strong hand to negotiate tougher financing terms. It's only easy to get capital when you don't want it.

[PUNJABI]

I did not go through the prospectus of the offering but from the news release, it seems that these are 5-year warrants. No idea what the game plan of these bondholders is. It seems so far they have shorted the stock to lock in profit of about 35%. They can do two things get the shares and cover their shorts or hold on to the short position and their warrants and cover their shorts from the market

[Nothingmatters]

Exactly my thiughts... thats why i dont invest in ath anymore. Much bettercompanies out there...

[pantono1]

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[churchofnutsacc]

How to sum up Athabasca - Great assets but poor, overpaid management. Broen is paid not like the CEO of a penny stock, but as if he were a bank CEO.