Mirant Warrants A (MIR-WTA) and B (MIR-WTB)
Mirant (MIR) is an electric utilities firm that saw its share price go from the low $40s to a bottom of $9.11 over the last 8-9 months or so. The company is making good money and some proclaim it's a screaming buy at the current $14.50 (or so) price. It has two warrants with about 20 months of remaining life; these warrants were issued in Jan. 2006 as a part of bankruptcy reorganization. These warrants once traded above $20 apiece in 2008, then cratered to less than $1 apiece in early 2009. Now with the stock trading around $14.50, the respective exercise prices for these two warrants are roughly $6-7 away.
Mirant shares require plenty of due diligence and their hedging positions could potentially lead to sizable gains or losses when they report earnings. The shares and warrants have been on a roller coaster ride and it takes impeccable timing when buying the warrants. The bid/ask spreads can be tight one minute on the warrants, then perhaps much wider an hour later. Volume is fairly robust for both the A's (at $1.33 real-time) and the B's ($1.75 real-time) and the underlying stock trades roughly 3 million shares each trading day. Both warrants are non-callable (i.e. they can't be cancelled).
Terms for the "A" warrants (35.3 million issued, I read) are the right to buy one share at $21.87 through Jan. 3, 2011. The "B" warrants (17.6 million issued, I read) are the right to buy 1 share at $20.54 through Jan. 3, 2011. If the shares rocket past $21-22, then both the A and B warrants will be in a position to rise rapidly as they realize intrinsic value (share price minus the applicable exercise price for the A's and B's). With 20 months to go before expiration, there will be fireworks along the way here, I'd bet. The chances of any warrant extension are virtually zero given that these warrants were issued in a bankruptcy reorganization.
Given the sheer amount of time MIR spent north of $25 in the past few years, these warrants represent an excellent speculation if you like the underlying stock. Be aware the frequent roller coaster rides with the share price and the potential of losing all money invested in the warrants. On the plus side, these warrants have great potential to rise exponentially from current levels. The bid/ask spreads seem to be tighter on the A's from my anecdotal observations, thus I prefer the A's to the B's.
The 52 week high/low data for the A's is $20.85 and $0.35. For the B's, it's 52-week high/low of $22.06 and $0.35. |
