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Microcap & Penny Stocks : Liteglow (LTGL) -- Ignore unavailable to you. Want to Upgrade?

To: AriKirA who wrote (4522)	6/17/1999 8:38:00 PM
From: prudentinvestor	Read Replies (1) \| Respond to of 4715

BE CAREFUL...the Investors Alert opinion is "comparing apples and oranges"!! The company they are comparing LTGL with, that went from under a buck to 18 bucks in 6 months...read it again carefully. They say that the "units" went to 18 bucks. "Units" usually means a combination of stock and attached warrants. Typically, units have a "bigger bang for the buck" because once the strike price of the warrants is reached, the units rise much faster than the underlying stock. In fact, once the strike price of the warrants is reached, a unit can rise X times as fast as the underlying stock, where X = number of attached warrants + 1. For example, let's consider a unit consisting of 1 share of stock selling for 75 cents, and three attached warrants each of which can be used to purchase one share of stock at 3 bucks a share. If the stock is selling for 75 cents, the unit (as just described) would be selling for 75 cents (the stock price) PLUS the perceived value of the three warrants with a strike price of 3 bucks. Since the stock is so far below 3 bucks a share, the warrants probably have minimal value, say 8 cents apiece, or all three warrants for 25 cents. So the unit would be priced at a buck (75 cents + 25 cents). Let the stock go up to 3 bucks a share. Now, the units are worth the stock price (3 bucks) plus the perceived value of the three warrants. Since the stock has been on an uptrend, there is probably a premium built into the price of each warrant (in expectation of the stock going even higher). It is reasonable to assign a premium of 75 cents per warrant over the strike price of 3 bucks, so the unit price would be 3 + .75 + .75 + .75 which equals 5.25. So far, the stock has gone from 75 cents to $3.00, and the unit has gone from $1.00 to $5.25. Which has given the "bigger bang for the buck"? Obviously, the units have. And...if we continue, now for every dollar increase in stock price, the units should rise =almost= four dollars in price (1 share of stock plus 3 warrants each of which rises almost as much as the stock)! I say "almost" because, as the stock price rises, the "premium" in the warrants will evaporate. That is an almost 4:1 ratio in performance of the units over the underlying stock!!!!! So if the stock goes from 3 bucks to 7 bucks, the units go from $5.25 to 7 + 4 + 4 + 4 = 19 bucks per unit. So, for the entire rise in stock price from 75 cents to 7 bucks, the units went from a buck to 19 bucks!!! With LTGL, we are talking about stock only, not "units". It is far "less bang for the buck"...but still a hefty return should the stock price eventually get to $5.00/share.