Brian I will respond since I am excitedly waiting for the warrants to replace my stock and leverage my position. I cannot afford to buy more LGND at the moment, so am planning to sell my stock and buy the warrants, which I suspect will track the stock pretty much point for point. I do plan to watch the warrants movement for another month or so to confirm this.
However, after the call I made on Amgen's leptin press release, you might want to get a few other opinions also. Especially Henry's. Also if someone sees a flaw in my thinking, I hope they will point it out.
Terms of the warrant: From June 3, 1997 until June 12 (I believe its the 12th), 2000, one warrant gives you the right to buy 1 share of Ligand at 7.12. If the warrants can now be bought at 8 1/8, the total cost of share would be 8.12 + 7.12 = 15 1/4, which is a premium of 1 1/2 above the stock. This premium enables you to control 66% more LGND than if you owned the actual stock. I figure it should track the stock pretty closely, although as LGND goes higher and time passes, the 1 1/2 premium will probably be reduced. But it may not be reduced much, since I believe there are about only 3m existing warrants. So they may continue to command a premium.
Even tho the asking price is 8.375, my guess is you would eventually get an order filled at 8.12. If LGND goes to 27, the warrants should be worth a good bit more than 16.75, since for each warrant you can buy a share for 7.12. I would expect that when the stock was 27, a warrant would cost you about 21, keeping the distance between the stock and the warrant roughly about 6, a wee bit less than it is now. The ratio should be relatively fixed, although as I said, I believe the premium will go down as the stock goes up. Good luck! |
