Bob,
Say you've got $1,000 you want to invest in Quidel. Should you buy Quidel common stock or warrants?
At the market close on 6 December 1996, QDEL's ask price was $3.8125 and QDELW's ask price was $1.75.
The strike price for the warrants is $7.50.
$1,000/$3.8125 = 262 shares purchased
$1,000/$1.750 = 571 shares purchased
571 (X-7.5) = 262 (X)
Where X is the minimum price QDEL would have to be by its strike date, in order for QDELW to be a better buy than QDEL.
X = $13.86
Check:
$13.86 (262 QDEL Shares) = $3,631
$13.86 (571 QDEL Shares) - 571 QDEL Shares X $7.50 = $3,631
The bottom line: At these prices, if you think Quidel will be above $13.86 by May 2002, six years from now, then the warrants are the best buy.
I've got an order in for warrants. For my $1,000, I'd rather have 571 shares than 262 shares of Quidel on May 2002.
Mike |
