Replies to post #8012 on GTC Biotherapeutics (fka GTCB)

[DewDiligence]

>it would have made more sense to calculate the B-S value based on both volatility and price before the public announcement, and give the warrant holders the better of the two prices. MAX(B-S value, buyout price)-.87<

I agree, FWIW.

[mouton29]

I think you noticed this, but it is bad enough that they get the B-S value taking into account the buyout price. But in computing the option value, the volatility input is computed by taking into account not the historic volatility but the volatility taking into account the bump in price that occurs when the deal is announced -- possibly the single most volatile day in the stock's trading history. That is, compute the value using:

"an expected volatility equal to the 100 day volatility obtained from the “HVT” function on Bloomberg L.P. determined as of the trading day immediately following the public announcement of the applicable Fundamental Transaction."