Saturday, June 5, 2010

Best World to issue bonus warrants

Best World International yesterday proposed the issuance of bonus warrants (exercise price $0.30) on the basis of 1 warrant for every 5 existing shares, which can be exercised 6 months from their listing and have a "shelf life" of 3 years. The rationale behind the proposed warrant issue was to reward existing shareholders as part of their 20th anniversary celebrations, allowing shareholders to participate in the growth of the company.

A bonus issue at this point of time is a curious step, given that the company has a large cash horde and we would have been happier if the company paid out some of that cash as a bonus dividend. However, a warrant issue is interesting and provides a new dimension to our investment in Best World Intl. We are no experts at valuing options or warrants, but if market conditions continue to be poor, we will not be surprised if the warrant is grossly underpriced by the market (due in part to the poor liquidity expected). We look forward to the listing and will be very happy to scoop up more warrants for leveraged exposure to the stock if the price "warrants" it.

1 comment:

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