Basic Energy Services Inc. (fka BASXQ)

[Steady_T]

CORRECTION. The warrant price used in the example is $53/sh. I picked that number up from a previous post. I just reread the PR and see that the exercise price is shown as $55.25 so the numbers in the example are off slightly.


A warrant is basically an option to buy stock at a specific price. The price is specified in the warrant. Warrants typically have a range dates for when they can be exercised. They also typically have an expiration date after which they cease to exist.

So.... in this case if the warrants are priced at $53/sh that means that any time after the warrants are exercisable you can exercise them and pay the company $53 for each share. If the market price is higher than $53/sh then you are making money. You can hold the shares if you think they will continue to go up or you can sell them immediately and pocket the difference between the $53/sh and the sale price.

In the case of BAS, no one knows what the share price will be when the new common start trading or which way the share price will go.

Let's say you bought 1140 shares at .43. That is a cost of $490.20

After the RS to 570 to 1 you will now own 2 shares valued at say $10/sh. so your stock is worth $20. That is a loss of $470.20. I chose $10/sh arbitrarily for this example. Who knows what the share price will be.

BUT you have 56 warrants with an exercise price of $53.

To break even you need to make $8.39 profit on each of 56 shares you paid $53 for. So you need to sell them at $61.39.

Actually the break even will be slightly lower because you already own 2 shares that we valued at $10 ea. so there will be profit made on those 2 shares.

I overlooked those 2 shares to make the example a bit clearer.

So, the bottom line is if the share price goes over approximately $61 then the existing shareholders will make money, anything less and they get burned.

Hope this is helpful.