waiting for the other foot to fall
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They do not change the market cap, but given that there is nothing but scarcity of trading shares, hope and hype underlying the market cap, I see the train going off the rails. I was hopeful that the warrants would be a good play, but they did not make it to effectiveness of the S1 because of unimpressive truck presales.
Yeah, if this is what happens before the S1 is effective, the shorts will have a blast with those shares. Glad I bailed. Now to unfollow the train wreck.
Its a DISCUSSION board, not a cheerleading convention. I had warrants but all the talk about how they would absolutely call them next week triggered me to sell.
It is highly irregular to force redemption of warrants so soon after issuing them. I had to conclude that with so many people all but insisting that they would, that it was leaked truth from someone close to the company, so I sold.
considering... unsure why I never thought to look at them but sounds like I procrastinated almost long enough.
"The investor doesn’t have the option of choosing a cash or cashless exercise" is contradicted by "will either be forced to pay cash for existing warrant conversion or be forced to accept a cashless exercise if NKLA calls the warrant"
That would make no financial sense. Anyone that understood the options available would choose cashless exercise, so there would be the appearance of dilution (to the float, not the market cap) with no cash in.
More likely, it would cause shorts to see the company as already in need of cash when they claimed to be flush on $700M.
Finally, anyone with any risk aversion would just sell off the warrants before the deadline.
There is no good ending to that path at this point.
for a $28.50 warrant consider two cases where the stock does go to and stay over $100 for a while.
1) Exercise: $28.50 + $11.50 = $40 invested. $60 profit. 1.5X ROI (2.5X sell/buy)
2) Sell Warrant: $100 - $11.50 - x --> $88.50-x sell proceeds where x is the future arbitrage. It will depend on volatility. This is a $60-x profit on $28.50. Right now X is "down to" $20 but it should get down to 3 as prices stabilize. At 3, the ROI is 2x and the sell/buy is 3x.
It definitely makes more sense to hold the warrants and directly sell them (always liquid) as the arbitrage factor (volatility and restriction cost) decrease than to convert (3 week locked out) and tie up almost 40% more capital in the trade.
to be clear at least one sales opportunity needs to be AFTER the buying opportunity, but cyclical is fine too.
I am looking for $50+ on the warrants and would be a buyer under 30. Never noticed the sell off until late and it was not enough to stop out and not enough to double down.
Today I was trying to focus on SemiLEDS but was instead distracted by my job despite it being a day off. Turns out that until I sold half two days ago I owned 1% of the company... hmmmm, talk about thin.
As the CEO siad, they have $700MM so they have no reason whatsoever to call the warrants in the near future. However, it is up to a $250MM+/- cash on hand if they needed to rake in cash and if the mechanics of a cashless excersise are hard enough.
The company would rather see them expire than redeemed cashlessly (less dilution) and from what I have read can't prevent cashless exercise.
This is a non-story to drive down the price and cover. I personally think it is overpriced, but I'll sit on my warrants until it is more overpriced...
point is, like options, you do not need to convert... when the warrants go up, just sell the warrants.
All I do know are these facts:
Shorts have shorted every share they can and the stock is still way ahead of fundamentals. If it follows TSLA or Netflix, it will stay ahead and shorts will always be a fact of life. No effect as long as more people buy the dream. If people decide to take profits and move on or just get scared of as new buyers, it will go down. No guess which will happen.
Hedge funds have shorted against warrants as much as possible. If they can short more they will buy more warrants and the prices will meet in the middle.
As long as no one knows what will happen, the disparity remains. As July 6th approaches, it will get smaller. It is a time-volatility gap, just like options have time-value.
The process to exercise warrants is not instant, so even on the 7th there will not suddenly be 23M new shares. In fact, riding the warrants as long as the stock is going up makes more sense than converting. People will just sell the warrants at stock-11.50-small amount. They will trade like 4 year, in the money options.
The holdup is uncertainty. No one knows what will happen in two weeks and the uncertainty is a putoff. I have sold my warrants every time my gains were significantly impacted and almost did again yesterday morning. Realistically they MIGHT hit 50 with a 62 share price.
market makers make money off volume and almost always lose money off trying to control prices. Any power they had over the pre-2000 markets has completely eroded with electronic trading birect through the various exchange access like ARCA etc.
In many cases, we are the market makers. Until yesterday I owned 1% of LEDS (sold half on a spike and this time it did not come back down) and I had buys and sells in. That is de facto making a market in the stock except no sane MM holds 1% of anything.
Normally I'd also laugh off 'short stories' having been totally toasted by one, but in this case I know it is true. I tried to short NKLA (covered by the warrants) to lock in the arbitrage and there is not a single share to be had (last week). I can ask again today, but there is no point. If shares were available the big shorts would have had at it already or a hedge would have beat me to the opportunity and would have bought the warrants up till they could not make money on the disparity.
Hard to say. We know the shorst think this was overvalued at $40 and we can assume the pre-IPO folks think its the next Trsla so I have to guess it would be the shorts.
still running a $23+/- arbitrage potential between the stock and the warrants. 72.50 - 11.50 --> warrants 'should be' $61
Those shares were registered Monday. Potentially they needed to get restrictive legends removed from certificates and then deposit them - my understanding of the process is 20 years old - so they MIGHT not be available in practice even if they are in principle.
The first effect will not be them selling but them being available to borrow by shorts.
missed some form 4's and SC13d's...
The shares issued were (a) debt conversion and (b) a PIPE both at $3 to maintain NASDAQ requirements
3,772,990 issued and 466,667 future conversion shares outstanding
$100K invested at $3 by Feng Shuang Zhu
$400K converted by Simplot ($1.2M remaining)
$300K converted by Trung Doan, CEO ($200K remaining)
Float is 2.15M and it has been under slow and steady accumulation all year. Normally if you saw a spike in price and volume there would be a newsletter promo and an increase in chatter. There is nothing. Every so often (2-4 days) someone grabs several hundred thousand shares up to the mid $3's.
Notably large days were 5/20 (a few days before the investments, above) with 8.49M (4M in a single hour) and 6/22 with 1.5M (almost 1M in an hour) and 8 days in between with better than 250K in an hour. They have been a buyer to at least the low to mid $3's and either they or coattail momo's are buying up to $3.70.
There has been no volume on the sell-offs.
Someone knows something. Some of is could be covid/UVC stories, but there would be similar volume up and down. I believe the company is approaching a binary event, probably on or around the July 8th expected filing.
It is starting to be accepted that the shares will not crash from yesterday's added float (not dilution, just more freely trading shares), so the warrants could get into the 60's over the next week or so.
It helps that the stock is also up on removal of the fear of selling pressure.
I personally think it is way overvalued, but riding some warrants for the obvious $20/share arbitrage.
I would not think the PIPE investors care about anything other than 'if I sell know, is it enough?' and 'If I hold, can I make a lot more?'
I guess that could affect Monday's NKLA trading, but if it is generally accepted, the stock is not acting that way. Either it won't happen or there is a lot of denial. Sure seems like no naysaying out there dissuades the true believers here.
Stock could fall $24 before it should have a real effect on the warrants, but they may also head south in sympathy.
that makes sense for July 4th weekend. Are the PIPE investors also restricted until then? I thought it was just the warrants.
In any case, between now and July 3rd, the shares and warrants should slowly converge and there is more chance of upside (real news or more hype) than downside. In that case why not hold? (very cautiously)
OK, so it is impossible to use the warrants as the borrow to short and there are no shares to short. That puts a floor under the warrants price within reason.
Also, if the cost to borrow is really $1/day then $17 of the $25+/- arbitrage would be swallowed up by borrow fees. While the arbitrage is still meaningful (33% in 3 weeks), if no one CAN borrow, then the imbalance will remain.
Ultimately share price will spike down into the $40's or low $50's and warrants will go up some in the worst case. As the 6th approaches either the stock will edge down towards the warrants or the warrants will come up (likely some of both).
I don't short stocks. Potential losses are limitless.
you hope you don't or there will be insider trading considerations again.
great now we have two stable geniuses running their offices on twitter.
generally you issue options at the start as an incentive to make the company worth more.
and what if they are? If the company succeeds they will be crushed. If not, they were right and it was nothing but a chat room scam. The outcome would be the same whether they shorted or not.
If they were shorting into a financing round it would be very different. That affects the company.
As of June 3, 2020, there were approximately 360,904,478 shares of Common Stock and no shares of preferred stock of Nikola outstanding.
This includes (i) 53,390,000 shares of Common Stock registered for sale by the selling security holders named in this registration statement (including shares referred to in the following clause (ii)), (ii) 890,000 shares of Common Stock issuable upon the exercise of 890,000 Private Warrants (as defined below) and (iii) 23,000,000 shares of Common Stock issuable upon the exercise of 23,000,000 Public Warrants (as defined below).
If you want to look at anything as 'selling' it would be 33.39M IPO shares that were just registered. If you genuinely believe short control the price of a stock, then you have already admitted it has no intrinsic value. If it did, shorts could not control the price.
Even then the less than 80M shares that are now or soon will be in the float are about 20% of the OS. They already existed, so to state they will tank the price is to state that it is just a low float MOMO play.
I have not tried to short with the warrants as cover, but that would make the two prices normalize. Really the price is not 'going down'. It is bouncing up and down erratically because no one knows what to value it at.
wierdly, the stock is down and warrants are not, so SOMEONE is possibly doing what I just said...
if there were shares to short I would buy every warrant I could, set aside the $11.50 per share, and short the stock till warrants could convert. Easy $30/share profit in three weeks and could even be long more warrants than I shorted shares...
But since there are none to short...
they can buy warrants.
No. The shares exist. They are a small % of the OS. The fact that they will trade in a few weeks is known.
The stock will do whatever it does and the warrants will converge with them in price.
$132.99, nice start to a new all time high.
so right now if you wanted to short the stock today there wouldn't be shares available?
side note: shares from $64 --> $76 +/- while warrants from $24 --> $31
d(stock)/d(warrants) = 8/7
They might stay better correlated for a while and over the next three weeks (stock - warrants) --> $12 +/- but is still >$40
want to see +$20 on that :)
currently $41 less than the stock, so still an arbitrage opportunity. The fact that this exists says no one can short the stock in any useful quantity.