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Biotech / Medical : Ligand (LGND) Breakout!
LGND 203.54+2.2%12:33 PM EST
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To: Flagrante Delictu who wrote (14234)2/4/1998 5:06:00 PM
From: WTDEC  Read Replies (4) of 32384
 
Bernie and Mike - I think the following analysis, using today's closing prices, may be helpful in judging the LGNDW premium: You can 'control' 100 Ligand in two ways. You can either buy 100 LGND for $1131.25 or 100 LGNDW for $600. You get to keep $531.25 using LGNDW until 6/2000. at which time you exercise for $712.50. So $600. plus $712.50 or $1312.50 is the out of pocket final cost going the LGNDW rout. This is $181.25 more ( the premium on the warrant) than buying LGND on day one. Paying $181 to in effect borrow $531 for 40 months represents an implied interest rate of around 14%. I think this is expensive. A margin loan to borrow the $531 and buy LGND common up front would only be in the 8% area.

I hope all the detail is not too boring, but I included it since the premium varies significantly based on the relative prices and some might want to recreate the analysis when they trade.

In the current situation with Farralon holding such a huge block (does anyone track how many LGNDW they still have to sell???), the overhang would suggest LIGNDW should trade at an extremely attractive (low) premium for buyers. I hope fellow Liganders will restrain themselves from loading up the trucks at high premiums (:>).
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