Now that the window to convert warrants (DJTWW) into shares (DJT) is open, by paying $11.50 per warrant to convert, then the price difference between warrants and shares SHOULD stay pegged very closely to shares being traded at an $11.50 premium, compared to warrants... But they're currently not.
As I type this, that premium is only $8.63 which means shares are priced at a bargain, compared to warrants. So, basically, $11.50 minus $8.63 equals a discount of $2.87 currently.
Because of this, I'm temped to sell my 2,000 warrants, and use that $ to buy 1,280 shares. Doing this would mean, essentially, that I would be saving ($2.87 x 1,280 = $3,673) vs. if I wait to convert those warrants down the road.
This is in an IRA, so there is no tax implication for doing this. I just wanted to see if anyone had any thoughts on this that I might be overlooking, before I go ahead and do this. Thanks.
They may be selling at less than the $11.50 strike price, but now is still not a good time to sell. I think it is entirely possible, probable even, that at some point the price of the shares will top $100. Hell, I think it's likely to happen within the year. It could even go to twice that, who the hell knows. If the short sales fuckery is taken care of, it could go to ten times that.
Let's say it goes to $101.50/share (for math convenience). Then the warrant price would almost certainly be $90/share. If you sell your 2000 warrants then you will get 180,000, from which you can then buy 1773 shares. That is FAR more than 1280.
Even if it only goes to $61.50/share (which it was at not that long ago), that's still $50/warrant, which would net you 1626 shares if you sell/buy at those prices.
Frankly, it makes zero sense to sell now. Think of it in terms of percent of price rather than total price difference. The math makes a lot more sense that way.
Slyver, thanks for posting, and yes, you are correct, and that occurred to me after I had posted.
After posting, I made the trade (sold warrants, bought shares) and I was all happy with myself because I exercised at under $9 each, instead of at the $11.50 price...
Then I took off on a two hour bike ride, which is when I always do my best thinking, and it dawned on me (what you explained) that the whole reason I'm invested is because I'm expecting the price will be significantly higher in the future, so that the more number of warrants or shares held, the better, and for an equal amount of money invested, warrants is the way to achieve that. So then I was bummed out that I had made a stupid mistake...
So, as I continued on my ride, I thought about how the price gap, since the merger was announced (up until the last week or so) has been pretty steady at $11.50 and this current sub-$9 gap will surely creep back up towards $11.50 again, soon, so when I does I'm going to trade back. If that goes according to plan I'll actually make money on the deal (or end up with more than my original 2,000 warrants)...
So it's been an up/down/up rollercoaster of emotions over the past couple of hours, lol. Luckily for me this in an IRA, so I can trade as much as I want without any tax implication.
It's entirely possible it will work out that way. Since I first started investing I have done a little bit of selling --> buying. I have made money on these deals (or rather, I have more shares than I would have if I had just held the shares), but I have kept this to a minimum because a) you never know when the stock price is going to turn and b) I feel like not playing that game is an important part of what's going on.
Nevertheless, I have done this a few times over the past couple years. It can certainly work.
I think it's currently on a downward trend. I personally would sell a few shares (a couple hundred maybe), store that as cash for a bit, then buy warrants when it goes down. Play that game a few times. Doing it immediately is, I think, a lot less likely to be as fruitful. I usually don't hold it as cash for more than a couple weeks at a time.