VectoIQ Acquisition Warrants, HELP, I Just Don’t Understand
Hey there. I hope you’re having a very nice May so far. The weather here in the DMV has finally started to turn warm…so it should be about 100 degrees next week with 70% humidity, haha.
I’ve been getting a LOT of questions the past few days about the VectoIQ warrants. Can’t imagine why.
I put this post out on my website a few days ago. $0.80 was a decent buy for us in the warrants. And then a reload when the stock pulled back to $13 has worked out pretty well also. I’m thinking of closing up shop for May…transfer money from brokerage to bank…mission accomplished.
But, some people can’t seem to understand how in the world a warrant with an $11.50 strike can trade at a $10?, $11?, $12? discount. It MUST be a BAH’GAN! Not so fast chippy.
If you’ve been reading my posts for a while you’ve seen this movie before. It was called, “Phunware, Return of the Monster of the Multi-Screen as a Service.”
Or, as I like to call it, my February 2019 ATM.
You see Phunware was similar to VTIQ and VTIQW. Phunware was going to provide the software for screens you would be viewing on your phone, at McDonald’s, at the stadium, at Home Depot, at the dentist…and eventually on Mars. (Phunware was before Virgin Galactic, so they get dibs on Mars screens.)
Phunware, just like VTIQ, was a SPAC and had warrants exercisable at $11.50. So, you sent 1 warrant, plus $11.50 to your broker, and voila, in your account would appear a share of Phunware common.
But, Phunware was not a stock to be trifled with. You see, VTIQ is a babe in the woods compared to Phunware. What did VTIQ trade up to today…$35.38? That is chicken scratch.
Phunware would laugh, or maybe give a slight smirk, at those prices. You see Phunware common stock traded to $550. That’s Five Hundred and Fifty U.S. Greenbacks.
So the warrants? They must have traded to $538.50 (parity), or at least $500, or $400…it must have been pure heaven. Take a wild guess…where was I buying warrants last year when Phunware was RIPPPPPPIIIINNG higher!!
Fifty cents. No, not the rapper. Fifty actual cents.
But, you’re thinking, I know you are…eventually those warrants must have gone to $100…right. $75? $50? Come on man…$25????
The highest trade EVER in those warrants, and possibly the highest there ever will be before they expire, wait for it…
$3.12
Don’t feel bad. I made a lot of money. People in my warrant group made a lot of money. And even people just reading my free blog posts made a lot of money. One dude, who listened to me when I said I was buying the warrants at $0.50, even did a guest post about how much money he made. You can check it out here.
But why the disconnect in VTIQ warrants? Why aren’t the warrants trading where they SHOULD be?
You just read that Phunware story, right?
You see…the warrants are not yet exercisable. You can’t ACTUALLY, right now, tell your broker, “Hey, here’s $11.50 and a VectoIQ warrant, get me on of them there VectoIQ common shares.” Nope. Nada. Not gonna happen.
But wait. They WILL be exercisable one day, right? Most likely, yes. (The deal could still fall through ya know…which, if VectoIQ didn’t find another acquisition, would put the warrants at…hang on, let me calculate this on my abacus…oh yeah, ZERO.)
We ex-Wall Streeters, who still trade, as opposed to selling real estate, have a four letter word we use that scares the bejesus out of us. And we use it to guide us in times of…ALWAYS. That magic, scary, boogeyman under the bed, we call RISK.
You read that Phunware story, right?
So, why aren’t the warrants trading where they “should” be?
- The warrants aren’t exercisable
- A stock that goes from $13 to $35 in 5 days, can go from $35 to $10 in 1 day (we call that volatility)
- And not (yet) exercisable warrants, with some small chance of going to zero, and a stock that is Wild & Crazy…well, that equals risk…and higher risk means lower value, or as we say in warrant world, they trade at a discount
So, there you have it. I hope you got some VTIQW like we did, at $0.80 (yes, that was before the deal was even announced…ve have our vays…) and some common at $13, on the pullback, and warrants at $4-$4.50. It’s been a great, to say the least trade. We’ve had a blast with it.
And, hopefully you’ve now both made money, AND are a tiny bit more knowledgeable about how things work in the wonderful world of warrants.
As always, you can find me and my little band of warrant traders right here: