Ya the margin seems small. The only advantage if we take up the warrants at 10cts now is that we saved on the brokerage.

However in my opinion, Falcon is a good company with low PE and low gearing. It is in the oil business which should be doing well going forward. In three years time, I believe the mother shares will do much better than the current level, hence the warrant's price.

But this in only my opinion, you should make your own judgement whether you want to invest in this warrant.

Let me try:

Your sums are correct but the figures you used in para 2 and 3 are not correct. The cost of the warrants should be 10 cts not 40 cts; and the conversion cost should be 40cts not 10 cts.

Yes, u go to the ATM to apply for the warrants after u received your allotment letter.

To convert the warrants to mother shares (before the expiry date), you have to call the registrar for Falcon to obtain a conversion form. Complete the form and return it to the registrar with the necessary payments (mode of payment can be confirmed with the registrar later).

You can trade the warrants in the open market like trading the mother shares as the warrants will be listed.

You can convert the warrants to mother shares within the next 3 years at a 'locked in' price which, in this case, is 40cts per share. Imagine, if the mother shares go up to, say hypotectically, 70 cts in one year time (12 mths from now), you will make a profit of 20 cts per share if you convert your warrants to the mother shares (the total cost being 50 cts (40cts + 10 cts being the cost of the original warrant). Of course, if the mother shares fail to perform (says stay below 50 cts per share) within the next 3 yrs, your warrants will be worthless when it expires in 3 yrs time (from date of issue). Then you lose money. It is a judgement u have to make. If you have confidence in Falcon Energy, then you can subscribe. If not, u can sell off the rights for the warrants in the open market (I believe this can be done under normal circumstance).

Note also that you can trade your warrants in the open market once  u owned them. If the mother shares perform well in the next 3 yrs, the price of the warrants can easily go beyond 10cts. U can then sell them and pocket the difference as profit.

hi beidou,

but what can the warrant do? sorry, new to this entitlement.

U can check the history chart for yr 2009, it ever went down briefly to about 30 cts. Thereafter it slowly moved up and the high ever hit 90cts. Now hovering at around 50 over cts. I think this is a good support level in the forseenable future. In fact one research report says the TP is 70cts.

The company can't have the 'free money' if people won't subscribe to the warrants. The warrant is not free (10 cts per warrant). So if the share price stays at 50 cts or lower before the closing of the offer of the warrants, this fund raising exercise would fail. I therefore believe nearer to the close of the offer, the company will have to support the share price to make sure it stays at least a few cts above 50cts. Otherwise it will be a futile exercise and this will not bode well for the image of the company.

Let's wait and see! 

Well, might want to look into the cash flow and the debt for this stock as well.

One of the fundamentals to go with the Technical Analysis of the stock.

 Star-Trader