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Microcap & Penny Stocks : GLBM expected to earn $.25 next year - A buy at $1.25
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To: Jonathan M. Traxler who wrote (684)8/21/1998 1:11:00 AM
From: Proton  Read Replies (1) of 938
 
Re: Trying to Price the Pig

IMPORTANT: My calculations are replete with assumptions. In no way are they intended to be used for the purpose of making an investment decision.

I have been trying to estimate the value of the units Maintech is selling. The units' increase provision makes them virtually impossible to price (as Maintech management is learning, one can hope). That increase provision -- insofar as I can understand it -- is valuable.

Let's leave the "December Spiff" off the table for now. As a further assumption: let's assume that the warrants are equivalent to an American-style call option with an expiration date of August 20, 2000. I then went to the CBOE web site, where I calculated the theoretical values of the warrants, given several different stock prices.

Without the details, here is my conclusion: as a unit of 1.0000 share of GLBM common and 0.58674 warrants (strike price 2.60, expiry 8/20/2000) selling for 2.20, the stock value of the unit would have been approximately $1.90. That is to say, had Maintech management not had that silly "December Spiff" provision, equity dilution would have been quite modest.

Adding the spiff to the value of the common and warrant parts of the unit lowers the value of the common. How far? I would practically have to reinvent options pricing theory to tell you (anyone want to fund a grant?). My initial guess is that we're quite close here in the 1.375-1.500 range. When the common was in the 1.750-2.125 range, the units were a screaming buy.

Delicacy (and a healthy respect for defamation lawyers) prevents me from saying what I think of McCaffrey, et al right now.

P.
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