Some Blinking Phun Updates

I had a conversation with a newsletter promoter recently. We were talking about how market makers trade a list of stocks, as opposed to whatever the hot stock is that day.

Of course stocks go on and come off the market maker’s list, but one of the benefits of trading the same stock day in and day out is that you REALLY get to know that stock. You can get a feel for when it’s overbought or oversold, and exactly when it should rally or stall out on any given day.

It’s a really great way to make money as a trader. And I believe it should be a big part of your investing / trading plan. By that I mean you should trade, as in you’re long sometimes, short sometimes, own calls sometimes and sometimes puts, all on the same stock.

Unfortunately there are two things that conspire against this. First, most people are looking for “the next big thing.” This means flitting from stock to stock and never really getting to KNOW how a stock trades.

Most people also only play from the long side, so they get discouraged and bail out on a stock that isn’t moving up constantly.

Second, it doesn’t sell investing newsletters or ads on CNBC to talk about the same stock over and over. Newsletter readers want new material, new ideas, new places to trade and invest.

So newsletter writers, and TV talking heads, and investment columnists are in a constant churn to find the “next big thing” to sell to investors looking for “the next big thing.”

Which takes me back to my conversation with the newsletter promoter. He said he had a guy who writes on options, and that in his personal account he only trades options on one index over and over, and absolutely kills it.

But he has to write about new option ideas at least a few times a week, because just writing about the same index, and when to buy and sell it, doesn’t sell newsletters. Sad, but true.

So, on that note, I wanted to post an update on some of the warrants and stocks we’ve talked about so far this year.

There has been a lot of action in some of these warrants, and I wanted to bring you up to date, and maybe bring your attention back to some of them you may have lost track of.

So, let’s get started with everybody’s favorite…

Phunware

This one remains an enigma wrapped in whatever it is an enigma is supposed to be wrapped in. You can read some of my previous posts on Phunware here, here, and here.

The company filed a registration statement with the SEC for the common stock underlying the warrants on February 5th. But as of yet, no word from the SEC on its approval, which must be given before the warrants are exercisable.

Maybe they’re too busy figuring out how to dethrone electric car CEOs.

Meanwhile the stock has moved up, and recently back down. The warrant, PHUNW, has traded down into the $.40 range and recently back up to touch $.93 (not a bad trade, BTW) as warrant holders await the SEC’s statement of effectiveness and hold their breath to see where the stock will be when the warrants actually become exercisable.

I had a great email question from Todd, thanks Todd, about the exercise terms if the company decides to call the warrants. He wanted to make sure his warrants wouldn’t be worthless given the “worth $.01” language in the SEC filing. Here is the majority of my email response to Todd. And yes, I still own warrants.

First, let me put your mind at ease.

I think the easiest way to understand that language is to think about it like a grocery store coupon. All coupons have an expiration date on them. So, say you’re at the grocery store and after you pay the machine spits out a coupon for $.50 off ice cream. The coupon will have a date on it, say it’s April 30th.

If you try and use the coupon after April 15th you can’t. It’s worthless. No $.50 discount.

Same thing if they call the warrants. You’ll have 30 days (just like the coupon) to exercise the warrants for $11.50. At the end of that 30 days your warrants will be worth $.01. Like the coupon, basically worthless. It’s just a way for the company to say “Hey, we’re getting rid of these warrants, either exercise them in the 30 day time frame, or they’re worthless after that.” Again, just like a coupon.

Here’s the tricky part for the company in deciding whether to call the warrants. Say they registration statement, which is necessary for warrant holders to exercise the warrants, is declared effective, meaning it’s good to go, today. AND, assume the company calls the warrants today as well.

Since the common is so thinly traded it is possible that just the threat of the increased number of shares, from warrant holders being able to exercise, drives the price of the common below $11.50. Warrant holders would then not exercise because it would be cheaper to just buy the common. AND, the company wouldn’t get the cash from warrant holders exercising either, which it would obviously like to have.

Everyone is unhappy, and the company also likely has a lawsuit on its hands from the angry warrant holders. So that is an argument against calling the warrants now.

On the other hand, maybe the price stays above $11.50, and the warrant holders exercise and everyone makes money.

Those two scenarios are the possibilities right now, and it’s why the warrants are trading where they are, because of the first scenario.

Until the warrants become exercisable, and we see exactly where the common goes when that happens, we don’t know the real “value” of the warrants.

Of course a third scenario is that the company does not call the warrants immediately, and waits to see where the stock trades when the warrants are exercisable. I think this is the most likely scenario. If the stock drops below $11.50 we’ll have warrants that are out-of-the-money, but are long term, 5 year, warrants. If the common stays above $20 for another 30 days, then they likely call them at that point.

So, those are all the different scenarios that could play out and all the risks.

Me in an email to Todd N. (yes, me citing myself is a joke, but it is the actual email. Why are you reading a citation anyhow? Are you a lawyer or what?

Blink

Another warrant we talked about recently, on 2/15, was Blink Charging, BLNK and BLNKW. Blink is in the car charging station business for electric cars. Probably not a bad business to be in.

The warrant was trading in the $.80 to just over a dollar range when I mentioned it in mid-February. It traded up to $1.70, twice, so anything picked up at $1 would have seen a 70% gain, or better if you got it below $1, which wouldn’t have been hard.

The stock, and warrant, have now pulled back, with the warrant trading at $1.25. Blink just announced a joint venture partnership to start offering its services in Europe, which took the stock up almost 14% today.

The last I remember a country or two in Europe mandated that all of their cars would be electric by 2040. If the country isn’t burned to the ground by rioters before we get to 2040, I’d say that an electric charging station provider could do pretty well there in the next 20 years.

I think the warrants, and the stock for that matter, since it’s a low priced issue, look good again here. What do you think?

Waitr

Finally, take another look at WTRH if you haven’t lately. I recommended this stock/warrant back in January in The Warrant Observer. Hint: next issue coming to subscribers in a few days.

WTRHW did extremely well as the company changed the terms of the warrants, for the warrant holders, because they wanted people to exercise the warrants. So many investors exercised, over 99%, that the warrants are now gone.

Let’s think about that for a second. You could keep your warrants, OR management would pay you what is in other words, above market price for them. Think management is optimistic about the chances for WTRH.

Two months after I highlighted the stock and warrant for The Warrant Observer, Hedgeye picked Waitr as its “Best Long Idea” projecting a 50% gain in the stock. The stock jumped 32% in the next few days, but has now pulled back, and appears to be basing before another move up.

I put down some of my thoughts on why I like Waitr in this post.

That’s it for me. Go fill out that tournament bracket. My daughter just told me former Duke player, and in my opinion one of the best announcers in college basketball right now, picked my Tarheels to win it all over Duke. Good man!