ecosbl

[Samir]

ECO trading at R44.33 which prices ECOSBL at 62c. Ecosbl expires 08/05/07. Seeing as the buyout for ECO is at R46.00, should I hold the warrant till 08/05/07 or till the buyout date(whichever comes first?) or should I hold the warrant till ECO spot gets closer to R46.00. Will time decay be a factor? Will ECO get anywhere close to R46.00 (I ask because noticed CONSOL never traded near R19.50) Thx

[SimonPB]

the trick is cost of money. It will take some time before eco holders get the 4600c and that time delay is being priced in with a discount to the 4600c buyout price.

[DEP]

time decay will be your enemy. R46.00 is only expected on the date the deal goes through. Shoprite is trading at R26.90 4% discount to offer of R28.

[Samir]

At R44.30, ECO is at a 3.7% discount to the offer price. I doubt anyone is going to buy in now because it will be such a poor return. I understand that the buyout will probably go through once ECOSBL expires. Does the warrant price on the matrix change as the expiry date approaches? I'm going to ignore the holding cost(i.e interest) for now. Thus I am willing to hold the warrant a little longer in the hope that the price may reach R45.00 or R45.50 within the next 2 months. Further to that, I still want to hold the warrant because I think/guess that a second bidder may come in at a higher price.

[SimonPB]

yes the matrix will change as time decay easts into the warrant. Higher price? This be some 60% up on the 30 day vwa price pre to initial announcement = huge.

[Samir]

Simon, heres my position. Bought 28000 at 36c some time back. I can afford to buy the shares upon expiry of the warrant. (10:1 conversion). I am in no hurry for the money/profits right now. Option A: Do I hold the warrant now till expiry, change it in for shares and then hold the shares till the R46.00 buyout? Option B: Sell the warrant now at 62c and sit with cash till I can see a new opportunity?

[SimonPB]

my 5c view is that the easy money here has been made. If I was holding eco calls I would exit and look for a new trade.

[Samir]

havent found any new trades. im a gambler on the market... limited to semi-average technical knowledge