Delta Nine Warrants (Nine.wt)
I recently bought in to Delta Nine, shortly after their IPO. The stock ran up to 3.60, I waited for it to come back to down when they announced some financing. Which played out according to Why Weedstocks go down in price, where Bruce Campbell from Cannabis Growth Opportunities Corp knew the price would come back down. (the CEO went on TV and said they will be raising money) Also followed my rule of not buying a stock on a run up, patiently waited for it to come back down. If it never did…move on to the next opportunity.
I bought into Delta Nine at a price of 2.70 in December. It continues to sit around this level. Just recently their warrants went free trading, which is what I’m now interested in.
I’ll say right off the bat, the price of the warrants seem steep right now. I’m watching and waiting for them to come down more. I’m hoping that early investors who got the warrants for free are willing to unloading them, dropping the price.
I bought CBW warrants for .12 ( the stock was around .80 and the exercise prices 1.50) CBW warrants were very cheap, most likely due to the fact that the stock would have to go up almost 100% to be in the money. Currently NINE.V only needs to go up 20% to get to the exercise price, but about 35% to break even.
Delta Nine Warrants (Nine.wt)
So currently the stock is trading around 2.70, why would you buy warrants to buy the stock at 3.25? You can buy the stock for .55 cheaper right now. The main reason to buy warrants is to pay less money up front for an equal amount of shares. The caveat is, you are paying a premium to allow you to buy the stocks at a certain price. If the stocks never get above the warrant exercise price, the are can expire worthless.
If you want to buy 1000 shares, it will cost $2,700
If you want to buy 1000 warrants, it will cost $520.
The warrants came out trading around .65 and are now down to .52. 52 cents is the premium you have to pay in order for the right to buy Delta Nine at 3.25.
Lets say you buy them at .52, the stock would have to go up to 3.77 (3.25+.52) in order to break even. (if you were to exercise the warrants and buy the stocks)
Trade the Warrants
Another option is to just trade the options, which a few have recommended to me. Warrants are much more volatile, which could work to our advantage. As the underlying stock price goes up, so do the warrants. The warrants usually move at a much higher % than the actually stock. Warrants are higher risk, due to the need of the stock to go above the exercise price to be worth anything. But while the stock moves up and down you could just buy and sell the warrants. This way you don’t care if the stock ever reaches the exercise price, but your warrants will be worth a lot more if the stock does go that high.
The higher volatility could also work the other way…if the stock drops to $1.35. The warrants will be worth significantly less. The stock may have dropped 50% but the warrants could be down 80%.
Nine.wt press release
Notice there is no price for a forced conversion. I like that. CBW forced the conversion (made you buy the stocks) if the price went above 2.00 for 10 trading days. Also the expiry for the warrants is June 2020, do you thin the stock price will go up above 3.25 in 2 years, I do.