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Technology Stocks : IFLY - travel sales on the web pure play

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To: Secret_Agent_Man who wrote (64)	4/9/1998 8:20:00 PM
From: Sverre Schriwer	Read Replies (5) of 4761

I feel the need to add some information regarding IFLYW. The warrants have an exercise price of 150% the IPO price of the stock ($5) which makes it $7.50 - NOT $6.25! They can be exercised at any time until 2003. They are redeemable by the company 30 days after IFLY has closed above $10 for seven consecutive trading days. (at 5 cents, so you better sell or exercise in time). Warrant valuation. ----------------- The very detailed calculations of IFLYW value in the last few posts are based on the idea that apart from other considerations the value of a warrant equals the stock price minus warrant price & strike price. The valuation of warrants, options and other derivatives are actually much more complex. In most cases the derivative is valued at a premium to the basic calculation above. The premium depends on several factors, mainly the time to expiration and the volatility of the underlying stock. Look at it this way: At close today buying 1000 IFLYW costs you $1032.25. 1000 IFLY would cost you $6968.75. Since the warrants follow (or should follow :-)) the stock price closely once they are in the money, this gives you the same potential upside at a $5 1/2K discount! The drawback is the expiration date, which in this case is in 2003 (no problem), and the fact that once the $10 limit is reached you have to sell or exercise because of the redemption clause. The true basis for valuing the warrants is that for a buck you'll be able to cash in a minimum of $2.50 if IFLY hits $10 anytime in the next 4 1/2 years. At the rate IFLY has been going, with the current Internet craze and considering the low float (only 1.3M of 7.69M outstanding acc. to Yahoo) the odds seem to favor this occuring in a timeframe of weeks rather than years. Judging the risk/reward of derivatives is alway a matter of personal judgement, but I bought quite a few of the warrants today as I consider them a real baragain. If IFLY gaps up on monday I will be proven right - if not I can wait a few months if need be. /Sverre

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