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Gold/Mining/Energy : Arcon Energy (MIDL Presently) The Ultimate Sleeper
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To: Dave Bissett who wrote (815)5/26/1998 7:00:00 PM
From: Kurt N  Read Replies (1) of 4142
 
My outlook is that the warrants are dragging the common down. If the common gets dragged down, then the preferred follows suit.

Suppose I am a MM and I can sell at the ask and buy at the bid. One doesn't have to be a MM, but it is a lot easier.

MIDL bid/ask 1.4375 by 1.4687
MIDLW bid/ask .50 by .5625

Lets say I am the MM on the ask with NO shares in inventory, and somebody places a buy order. I would sell the MIDL at the ask (in effect being short) for $1.4687, and then buy the MIDLW at the bid $.50. If I exercised the warrant to cover my short position I would pocket ($1.4687 - $.50 for warrant - $.50 to exercise) = .4687/share

Other MM's want a piece of this action too, so they lower their ask so they are the MM on the inside bid/ask.

The way I look at this is the MIDLW is in effect the shares available in MM's inventory. Buying up the warrants limits the MM's supply of shares OR if you buy the common the MM will buy the warrant.

With all the new MM's in MIDLW/MIDL and even MIDLP, they have to be getting there shares somehow.

Once the supply of warrants shrinks from buying, the price of the warrant taking into account the $.50 exercise should equal the common, then there is no advantage from the MM perspective of shorting the common and covering with the warrants.

Kurt
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