THREAD RDOC OPPORTUNITY:
Just wanted to remind the thread of a potentially powerful way to leverage RDOC. I know that the terms of the warrants have been mentioned here before, but haven't evoked much commentary. Here are the terms again:
Exp date 11-19-2001, strike price of $2.87 at which time 1 warrant and $5.74 will convert into 2 common.
The terms are incredibly powerful because one warrant essentially locks in two shares of common at 2.87 each.
SO: with RDOC at 3 5/8, the INTRINSIC value of warrants right now is 1.51. Since the warrants currently trade at around 2 1/8, we can say that the time value of the warrant is roughly .625.
But here is where the fun starts. Let us assume that Rande is correct (not a far stretch of the imagination), and RDOC continues to run on anticipation of blowout revenues for this quarter, and trades at 7 dollars (which if I am not mistaken lands in the middle of Rande's 6-8 range he posted some time ago). If this were to occur, the stock would have risen roughly 100% from its current level. NOT BAD. BUT...
The INTRINSIC value of the warrant in this situation would then be 7*2=14 - 5.74= 8.26, or almost 300% above its current price! I for one am willing to take the risk that the stock will continue to advance, and am buying warrants today, even though they are theoretically trading ahead of themselves right now. Any comments????
EDIT:
Just for the sake of hyperbole, if the stock hits 10 (why not, it is part of RANDE's ultraaggressive port for a reason), then the stock would have advanced almost 200% from here, but the warrant would be worth 14.25, or roughly 500% above its current price. |
