To: Dixie7777 who wrote (7901 ) 10/11/1998 3:52:00 PM From: E. M. Edds Respond to of 44908
Yes, you would "win" at any price over $.42, if your definition of winning is making a profit. What I am specifically pointing out is the opportunity cost of doing my options deal vs. buying shares on the open market. You have to mathematically measure the benefits of the extra shares with my offer vs. the lower price by buying now at market. Let me give you two examples: If you accepted my options offer and paid $10000 next week to secure the deal, and in January paid $32000 for 100000 shares, your total cost is $42000. If, on the other hand, you bought $10000 worth of TSIG next week at a market price of $.18, you would own 55,555 shares. Either way, you spend $10000 next week. If you decided to sell the shares that you spent $10000 on at $.60, with the options deal you would make $18000(60000-42000=18000), but with just buying shares at market next week you would make $23,333[(55,555 x 0.6)-10000=23,333]. However, if you sold at $1.00, from the options deal you would make $58000 (100000-42000), but with just buying $10000 worth of shares next week you would make $45,555 (a benefit to you of $13000). The cut-off price, where you would be better off with the options deal than with just buying shares at open market, is $.72. Finally, as the price increases over $.72, so will your benefit of taking the options deal vs. buying open market next week, on a linear scale. If you sell your shares at $2, with the options deal you profit $158,000, but with buying open market next week you profit only about $100000 (more than two times the $13000 difference at $1 per share although selling at only two times the price). The only reason you would accept the options deal is if you are relatively certain that when you sell, the price will be over $.72. Of course, if it's over $.42, you will profit over not investing the $10000 at all. Eric