IFLYW the IFLY-warrants, a REAL VALUE PLAY Message Board

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Technology Stocks : IFLYW the IFLY-warrants, a REAL VALUE PLAY

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To: blankmind who wrote (79)	4/23/1998 3:11:00 AM
From: StaggerLee	Read Replies (2) of 171

>>why pay this premium? The premium is because the warrants give you two advantages over the stock: 1. Although you have all the up-side, if the stock drops, your loss is limited to 1 3/4. A holder of the stock can lose theoretically $6.75 based on today's price. You pay a premium for this "insurance." 2. Cost of capital - a holder of the stock has to tie up $6.75 in capital. At 5% for 3 years, this amounts to about $1. The warrant buyer has the same up-side potential as the stock buyer without incurring the cost of capital. The cost of capital is factored into the warrant's price.

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