[wit's securities gains must correct with the market]
"The one thing about any gains tied to warrants or shares would be that they would experience a significant drop in value along with the market, as it corrects."
agreed.
however, my most recent post regarding a surprise profit was based on a detailed analysis of IPO underwriting fees, all of which are paid in cash.
any shares or warrants, that were paid for other services, are gravy that may or may not improve profits. i ignored them. even if ALL the warrants and shares that they've gained as payment for services to date, turned out to be worth ZERO by the end of Q1, that would still only remove $5.5m from the picture, which would still leave wit with a likely big profit for Q1.
a more likely scenario is that the cumulative total worth of securities paid for services to date were worth more than $5m at the end of Q1, when the nasdaq index was "only" down to 4,500 or so, and are still worth at least close to $5m, if not a whole bunch more, even now, with the nasdaq index at 3,800.
wit *does* have exposure to market risk though. in particular, independently of payment for services, wit converts a lot of cash (about $100m) into "short-term investments", which are clearly a big risk. however, aiui, the risks associated with those investments are managed *very* carefully. aiui, they must be managed in a much more risk averse manner than typical investments due to legal fiduciary responsibilities regulated by the SEC. their sec filings talk about daily meetings to carefully assess their exposure to market action. they have some of the most skilled high tech investment bankers and traders in the world, operating with limited risk as a primary objective. i expect them to do fine, perhaps even make a bundle, even in the face of a major market correction.
however, IF they have hugely screwed up, so badly that they fail to post a profit, it might be very ugly. morale will suffer, law suits will fly, credibility will suffer badly, and there's no telling what will happen next. |
