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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: sjemmeri who wrote (15967)	12/27/2002 2:37:39 PM
From: TimbaBear	Read Replies (1) \| Respond to of 78658

Hi Steven However, the strike price of warrants won't be at 125 % of your fair value, it will be at 125 % of the higher value that the settlement places on the new common. So I didn't follow the part where you came up with a value for the warrants based on your fair value of the new common. (IF that's what you did.) Well, I must admit that I'm not sure of the validity of using this approach to this step of the problem myself. However, the reason I did was I felt that I had to adjust downward to account for the swap multiple between the warrants and the New Common. Not knowing what some other party might use for value, I felt it was consistent to use the value I derived as if it would be the same as the value some other party would derive. I also felt that any number I arrived at using this technique would still be consistent with being conservative in approach. Your point that the higher the value of the stock, the lower the value of the warrant doesn't necessarily follow in my mind. Because of the 125% of Fair Value fixed conversion rate, the value of the warrant should increase pretty much in lock step with the stock. What do you think? Timba