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Old 12-02-2007, 03:05 AM
Jason Strasser (strassa2) Jason Strasser (strassa2) is offline
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Default Re: Valuing warrants

i meant 50 (as in 50%), not $50
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Old 12-02-2007, 03:23 AM
stinkypete stinkypete is offline
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Default Re: Valuing warrants

fair point... I had the impression that if the stock price shoots up and the company knows warrants will be exercised, they will generally buy back stock to prevent dilution? still I think you are best off approaching this problem treating the warrant as a call option and then adjusting...

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yes, you'd price the the same way as a call option, but you'd have to make the applicable adjustments. (and realize that you'd have to make similar adjustments on regular call options if the strike prices and maturities are such that the exercising of warrants will matter)

as for buybacks, it doesn't really make a difference. if the warrants are exercised at $15 when the stock price is at $20, the company can only buy back 3 shares for every 4 new ones it has issued.
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