Warrants19 Jun 2021 11:59
I'm sure London won't mind me posting his comments about the warrants. Read carefully.
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I don't understand some people's focus on the warrants. These are unquoted warrants - so they are exercised before the expiry date (which is June 2026). Unless I wanted to sell the shares, and arguably I would start with some of the 32.1m shares I had subscribed to, why would I part with cash to exercise them?
If the price falls back to 2p from tomorrow until June 2026, if I haven't exercised the warrants, I lose nothing. If I have, I lose 3p a share. If the price rises to 10p a share, if I haven't exercised the warrants until this time, I have made 5p a share. If I have, I also make 5p. So why would you exercise unless you wanted to sell - the warrants give you the same upside as holding shares but none of the downside.
The only other reason might be if the underlying shares paid a dividend not entitled to warrant holders, but we're not there yet!
Ask yourself why you would exercise warrants that don’t expire until June 2026?
There is absolutely no further upside for them to exercise but there is potential downside. So if they do want to get to the stage where they issue a TR1, and this would lead to share price strength on it’s own, better to have committed the capital they would have to part with to buying shares in the open market. The warrants give them financial leverage which disappears once exercised.
Clever and shrewd does not mean subscribing to warrants that at one stage today were only 10% in the money when there is only financial downside risk to doing so.
As a portfolio manager, warrants give me financial leverage. The only reason I would exercise non-publicly traded warrants would be because they were in the money and due to expire or because I wanted to sell the underlying equity.
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