Yup. Consider this scenario: It's April 1st. The share price bounced off the low of the day ($15.11) and has reversed back up through $16. You intend on buying another 1000 shares (essentially, a $16,000 investment).
All the earnings estimates are very positive. You are unaware of the effect that the FVA will have on the EPS, and subsequently, the share price. You buy.
As opposed to the alternative scenario: You are aware of the potential effect the FVA could have on earnings. You know the number of warrants exercised in Q1 because the numbers for March 31 are all in the 10Q on page F-41. You know the closing price on Q1. You've done enough homework to be able to approximate that the EPS will show a loss. You decide to hold off, and eventually buy @ $11 on May 12th. A savings of $5000
Of course the scenario is derived from hindsight, but nonetheless, it highlights how understanding the upcoming GAAP EPS can prevent being blindsided.
I knew nothing about the potential effect of FVA on EPS, and hence, share price. At present, I now have the basics down on how the FV is calculated, and just need to learn how to derive a couple factors. I've already tested my assumptions on the FVA for the past quarter, and was able to nail the FV for each issue within 1% of the values given in the Q1 10Q. Once I get that last part down, I'll be able to test it going forward into Q2. I know right now I could derive a ballpark, but I want to be able to use all the information at my disposal that I can.
Given how off the analyst estimates for Q1 were, I kind of like the benefit of developing some understanding of how to derive a fairly accurate estimate for Q2. It's taken a lot of work and I still have a bit to figure out, but I think it's going to pay off.
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