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Biotech / Medical : Ligand (LGND) Breakout!
LGND 206.84+2.8%Nov 18 3:59 PM EST
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To: LLCF who wrote (27181)1/5/1999 10:08:00 AM
From: aknahow  Read Replies (2) of 32384
 
Obviously you don't exercise unless it is profitable. At the present time it is not profitable to buy the warrants and exercise at $7 1/2. The fact remains that some institutional investors were give a special break to be allowed to put up $5 1/2 cash and the warrants they hold to purchase LGND stock which was selling close to $12.

If this was a good deal for LGND, and not that costly, they should offer it to everyone. Warrants are issued in part as as incentive to get investors to make an equity investment. They can and at times do expire worthless. In June of 2,000 if the special favor had not been granted to these institutional holders LGND would have received either 29% more cash or zero but a taxable event by having the warrants expire worthless.

The warrants with an exercise price of $7 1/2 are worth $5 5/8 in the market. It is not as though LGND bought the warrants from the holders at market price. They allowed them to exercise now at a newly established exercise price of $5 1/2. If LGND did this for all holders thats fine with me as many of the recent post have helped me understand the true cost better. I still would not understand the need for cash at this time, given the ELAN deal, unless that deal net of drug development cost does not generate as much cash as I thought.
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