Replies to post #50031 on Sigma Labs Inc (SASI)

[El_Jefe42]

$4 less than the stock price.

Just a question on the warrants. What do you think the warrants will be trading at if the stock goes to 4, 6,8 or 10 in six months?

[VisionaryInc]

Can't predict the future, no clue. Seeing as the exercise price is $4.00, you can calculate the price of the warrants plus the exercise price vs the common stock pps to see if it's a good buy or not.

And I believe they expire in 2019?

I own a decent amount I should know lol, but nonetheless you would still have at least a few years for the pps to rise and be 'in the money'

The way things are going, I think the current $1.00 price is a little high for right now to purchase, but in the long run could easily be a profitable investment.

[DoDeeDee]

On warrants, I would think once the PPS was well over $4 there would no longer be much of a market for warrants. 'Guessing' the warrant price would follow the stock price so it's a wash. If PPS at $6, then warrants should be just under $2, right? ($6 - ($4 + transaction cost)).

If one truly believes that the PPS will soon go to $6, you could buy a warrant for $1 now and make just under $1 per share when it goes to $6 or just buy a share now for $3 and make $3 per share at $6.

[DriftinWayOfLife]

Train, I believe that the warrants expire in five years, so there is a significant time premium built in. It is the value of the time premium which justifies a price differential of less than $4 between the warrant price and the share price. Currently the time premium is worth about $2 and given the five year expiration period, I believe that this will hold for quite a while. The warrant price and the share price should move in a fairly tight correlation, and with a larger move as opposed to a smaller move, the correlation should more closely approximate 1.0 - I will use rounding to keep the napkin math below easier.

At the current time, you can buy three warrants for the price of a single share, thus any significant move upwards in the pps will be magnified by owning warrants rather than shares. For example, take $100 and buy 35 shares versus 100 warrants. If the pps moves to $6 per share you will have doubled your money if you cash in ($200) On the other hand, assume the current $2 differential between warrants and shares and the warrants would be worth about $4, resulting in a quadrupling ($400) if the pps went to $10, then the shares would have tripled in value but the warrants would show and eight fold increase in value. Larger moves in pps will result in a larger gain.

As the years pass and the time value of the warrants evaporates, the differential between the pps and the warrant price will more closely approximate $4

If in five years there is not a significant move north in the pps, then the investment in either shares or warrants will have value as a learning experience and/or a story to tell about how bad one's judgement could be.

Five years is sufficient time for me to be very very comfortable with accumulating more warrants now rather than shares, as I see the upside for the warrants as being greater given the multiple warrants per share at the current pricing. As the pps and the warrant price move north and the warrant price becomes a larger percentage of the share price, the advantage to warrants diminishes. If you take the $10 share price and the $8 warrant price, then you would only get 20% more warrants for the same money.