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Technology Stocks : IFLYW the IFLY-warrants, a REAL VALUE PLAY
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To: StaggerLee who wrote (84)4/26/1998 5:14:00 PM
From: StaggerLee  Read Replies (1) of 171
 
I have a created a model to calculate the market value of these warrants. The price of the warrants is equal to the following:

1) The value of a 4.75 year call option with a $6.25 strike

*MINUS*

2) The value of a 4.75 year call option with a $10 strike

*PLUS*

3) The value of a 35 day at-the-money call option with a $10.00 strike

*PLUS*

4) $.05 (the proceeds paid at redemption.)

All calculations were made using the Black-Scholes model. Strangely enough the volatility factor used in the calculation has little impact of the calculated warrant price, as the impact to the various components of the calculation tend to negate each other. Also interesting is the amount by which the call feature impedes the value of the warrants - they'd be worth substantially more (like, double) if they were not callable at $10.

The model indicates that the correct price of the warrants is approximately $1.65 when IFLY is trading at $7. Later I will post the value of the warrants assuming an IFLY price of other amounts.
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