INFE ... Infocall another Sleeper Message Board

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Microcap & Penny Stocks : INFE ... Infocall another Sleeper

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To: loe4net who wrote (6573)	7/22/1998 7:06:00 PM
From: Sigmund	Read Replies (1) of 10343

PP usually means that the new investors get a better deal than the existing investors. Conversely, the existing investors get a worse deal than the new investors. ACMI(C) did one a while back and that combined with a reverse split gave the existing investors a haircut of over 75%. Part of that PP was warrants at the market price. This essentially meant that if the stock were to go up significantly the cost basis of the PP folks was essentially half the market price at the time they invested. What has been described in some prior postings is not quite as bad. If the warrants are above the market price this gives existing investors a bit of a window but it severely limits the upside. If the PP is at $1.50 and the warrants are exercisable at $3, this means that if the stock were to go to $10, the average cost of the new shareholders would be $2.25 for twice the shares involved in the PP. That is a lot of dilution and means that it would be difficult to get that kind of capital appreciation. On the other hand, the warrants provide a built in financing vehicle for the company down the road at a low transaction cost so that part isn't bad. But as a potential investor, buying now at $1.50 doesn't seem very attractive if some can buy at $1.50 and get a warrant thrown in for free. Assuming the warrant is worth $0.50, it would be as if the new investors are buying for $1. Until the exact terms of the PP are known, it will be difficult to get this stock to rally. Someone asked for suggestions. Here is one: allow the warrants to trade. That way, all will know what the warrants are really worth. Everyone will then also have the option to invest in the warrants if they choose.

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