"I should mention that these warrants as described are worthless unless the stock goes above $4, since under $4, the warrants' holders might as well go into the market and acquire shares"
Not completely worthless, though I'll admit of limited worth.
Let's assume some pending "good news" that is actually substantial. (A stretch, with this company, I know. :) ) Going into the market to buy a large number of shares is going to pop the stock price, and they would probably have to pay a price significantly higher than the market price at the point at which they begin buying.
But they can exercise the warrants at any time, at the current price. So, knowing that good news is coming, they could exercise the warrants during a period of market weakness, without moving the stock price at all. (Well, of course, the price would likely WEAKEN once the news of the exercise hits, but, of course, you've got that "good news coming". :)
An unscrupulous management, of course, could intentionally bumble, creating an opportunity for exercise at a cheap price, as well. |
