Hello Kim,
Fascinating action in MVIS and MVISW last week!
From reading your post, it seems that we have very different understandings of MVISW - can we put our heads together and try to straighten this out? I remain COMPLETELY baffled by the relative valuation of MVIS at $10 and MVISW at $5, and would love to have it explained by someone (such as yourself?) who finds MVISW to be the more attractive instrument at these values.
You wrote:
>>>>>
I fell the warrants being fun now: Well in the money, and still 4 years to go before maturity. Has anyone been doing some advanced calculations on what the premium represents in terms of compounded interest compared with the remaing time?
<<<<<
My own [mis?]understanding of the warrants:
(1) They are redeemable 1:1 for shares of MVIS at $12, and are NOT in the money.
(2) Redemption can be forced by the company when MVIS reaches $24.
(3) Based on (1) and (2), the value of the warrants should never exceed $12.
(4) IF MVIS reaches $24, the warrants will then be worth $12.
(5) If MVIS only reaches $X, (X<24) by 2001, the warrants will be worth $(X-12) at expiration [leaving aside "advanced calculations" about the interest, etc.!] For example, if MVIS doubles in value to $20 by 2001, MVISW will then be worth $8; If MVIS only grows modestly to $12 or less by 2001, the warrants will expire worthless.
(6) Based on (4) and (5), and current valuation of MVIS = $10, MVISW = $5, the 2 instruments are equivalent IFF MVIS more than doubles and reaches $24 by 2001. (With MVISW then at $12, both will have returned an identical $140% per dollar invested at current values. (Obviously, MVIS will increase twice as much per share.)
(7) Under any other RATIONAL scenario I can think of, MVISW at $5
should underperform MVIS at $10, per dollar invested.
(8) If the above are correct, then anyone choosing to buy MVISW rather than MVIS at these current values must either (a) be absolutely, 100.00% certain that MVIS will reach $24 by 2001; (b) be relying on the "greater fool" theory of investment; or (c) have a sophisticated investment strategy well beyond my keen.
Caveat 1: MVISW redemptions can be forced only after MVIS has closed >= $24 for 20 straight days. IF MVIS does approach $24, there could be considerable volatility. (Example: If MVIS shoots past $24 before the warrants can be called, MVISW could then be worth somewhat more than $12. But this seems like an extremely speculative possibility, which even then yields just a slight advantage to the warrants.)
Caveat 2: I also thought MVISW was overvalued relative to MVIS when they were just $2 and $5, respectively. I have since been proven wrong, so what do I know! (http://www.techstocks.com/~wsapi/investor/s-9735/reply-137)
I will be very grateful if you or anyone will kindly point out where my thinking has failed me here.
Sk†l! ,
Droog |
