Warrants

andymaddra

Prior to the restructuring of British Energy's shares early last year I held over 200 shares. After restructuring I found myself with just 8 shares plus 18 warrants. What is the purpose of the warrants? What should I do with them, hold them as they are or convert them into shares?
Thanks, Andy

Chrismaths

A warrant is an option to buy a share at a fixed price - this may be at a fixed time or at any time. Warrants trade on the stockmarket just like the underlying share. With such a small shareholding (BGY is trading around £7.30 per share, and the warrants BGYW around £6.25), it is not worth holding onto. Either invest some more if you like the company, or register them with a cheap online broker, sell them, and have a couple of nights down the pub!

amosworks

Or sell them and then reinvest instead of p!ssing it away down the pub

Chrismaths

"The love of money as a possession -as distinguished from the love of money as a means to the enjoyments and realities of life-will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease "
JM Keynes

amosworks

Abstainer, n.:
A weak person who yields to the temptation of denying himself a pleasure.
-- Ambrose Bierce, "The Devil's Dictionary"

derrick

You can use the warrants to purchase B E shares for the discounted ptice of 98p, therefore 18 warrants will cost you £17.64, and if the shares are trading at £7.30, they will be worth £131.40.

I have already done this so know it is correct, if you want to soeak to someone about it phone Lloyds TSB registrars on 0121 4157058 and tell them you want to ask about British Energy

Chrismaths

True, but the effect on his wealth will be negligible:

Current position BGY*8 + BGYW * 18 = £7.18*8 + £6.155*18= £57.44+£110.79 = £168.23

Conversion: BGY * 26 - £0.98*18 = £186.68 - 17.64 = £169.04

I suppose then he'll only have one holding to sell, so it will save him some dealing fees.

andymaddra

Many thanks. I understand warrants now.
It seems that convert and sell is very slightly the better option, followed by a pint or two, then reinvest the balance. Cheers

derrick

Chrismaths wrote:

True, but the effect on his wealth will be negligible:

Current position BGY*8 + BGYW * 18 = £7.18*8 + £6.155*18= £57.44+£110.79 = £168.23

Conversion: BGY * 26 - £0.98*18 = £186.68 - 17.64 = £169.04

I suppose then he'll only have one holding to sell, so it will save him some dealing fees.

Not sure where you are getting your figures?

My reply #5 gives the correct info, he can exchange the warrants for British Energy shares for 98p each = £17.64 if the shares are trading at £7.18 (as against the £7.30 in my reply #5) they are immediately worth £129.24 a profit of £111.60. there is no need to convert anything, add his 8 shares at the same price £57.44, his total holding is £186.68.

Yes there will be only 1 holding, there is no charge for exchanging the warrants for shares except the 98p each.

Chrismaths

When I posted, BGY (British energy's ticker) was £7.18 to sell, and the warrants (BGYW) were £6.155 to sell - remember you can trade warrants without converting them (or 'exchanging' or 'exercising' or making them fully paid - potarto potato) - so I was comparing the value of selling them all as is, or converting then selling. To convert them, he'll have to pay £0.98*18 = £17.64, and he'll end up with 26 shares, worth £186.68 - a net figure of £169.04. You've left out the cost of exercising the warrants for some reason.

derrick

Chrismaths wrote:

When I posted, BGY (British energy's ticker) was £7.18 to sell, and the warrants (BGYW) were £6.155 to sell - remember you can trade warrants without converting them (or 'exchanging' or 'exercising' or making them fully paid - potarto potato) - so I was comparing the value of selling them all as is, or converting then selling. To convert them, he'll have to pay £0.98*18 = £17.64, and he'll end up with 26 shares, worth £186.68 - a net figure of £169.04. You've left out the cost of exercising the warrants for some reason.

Yes I did miss out the cost of exercising the warrants, don't know why, but there is still a substantial difference between your #7 post and the true benefit to to OP