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Biotech / Medical : Ligand (LGND) Breakout! -- Ignore unavailable to you. Want to Upgrade?

To: WTDEC who wrote (14235)	2/4/1998 5:27:00 PM
From: Flagrante Delictu	Respond to of 32384

WTDEC, We are not in disagreement with regard to your analysis. In fact, you will notice that I mentioned that I preferred to buy the warrant at a somewhat lower premium to the stock than it is currently selling. Furthermore, it appears to me that you have not considered that some traders either do not have available to put up, or prefer not to put up, the additional $500 plus dollars to own the stock rather than the warrants. Nor do you seem to make much of the fact that if the stock were to decline severely, cf. FUGAZI & tonyt, the dollar loss should be significantly greater than that of the warrant. It is apparently this attribute in an uncertain biotech market that results in the higher premium than we would prefer. If, on the other hand, the stock erupts positively, the percentage gains on the warrant per dollar invested should be much higher than that realized on the stock. This morning the warrant was available at $5.50 with the stock trading at $11.25. That seems like a very reasonable relationship. Bernie.

To: WTDEC who wrote (14235)	2/4/1998 7:52:00 PM
From: Torben Noerup Nielsen	Respond to of 32384

>Paying >$181 to in effect borrow $531 for 40 months represents an implied >interest rate of around 14%. I think this is expensive. A margin >loan to borrow the $531 and buy LGND common up front would only be >in the 8% area. All well and true, but there are fairly strict limits on how much you can be margined. So there is something missing from the equation. Some of it comes down to me evaluating how much of a return I can get per year. Being somewhat arrogant and optimistic, that is a high value! Cheers, Torben

To: WTDEC who wrote (14235)	2/4/1998 8:49:00 PM
From: tonyt	Respond to of 32384

> Paying $181 to in effect borrow $531 for 40 months represents an implied interest > rate of around 14%. I think this is expensive. > A margin loan to borrow the $531 and buy LGND common up front would only be > in the 8% area. Thanks for taking the time to crunch the numbers. Your analysis clearly shows that an investor should not be buying LGNDW. (If somone wants to trade the warrants, that's a different matter) Also, based on your analysis, it looks like $5.25 is fair value for the warrant (...milage may vary. i.e., many brokers charge less than 8% for a margin loan).

To: WTDEC who wrote (14235)	2/4/1998 9:40:00 PM
From: Stewart Whitman	Respond to of 32384

Actually, you can use a quantitative model to examine what the theoretical risk-neutral price of LGNDW should be. Try: www2.wallstreetnet.com Call Option American-Style Exercise Stock Price 10.98 (11.31 - wrnt. dilution) Exercise Price 7.125 Value Date: 02/04/1998 Expiration Date: 06/01/2000 Volatility 62 % (calc. from 1300+ days history) Interest Rate 6 % (2.5 yr treasury) Model: Black-Scholes American Model Rate Type: Annualized Rate This gives a value of about $6 to the warrants. Stew