SPALI, a mispricing of the Warrants?
Where is the premium on the SPALI-W3 warrants?
Two key insiders have been selling more shares then they bought warrants (by a factor of 2 to 1 as they sold some 19 mill Baht worth of shares, and bought some 9 mill. Baht worth of warrants), their motivation makes sense. Consider here why:
The warrants are trading around 1.90 (SPALI-w3) and they are convertible at 1.50, into the common by mid year 2008. Since Spali shares are trading around 3.40 (3.40-1.50 = 1.90) there is no premium asked for the Warrants! Hence with the same capital you can tie-up just about as many shares; as they are trading "in the money" by 1.50, or exactly the warrant guaranteed conversion price. The only premium actually is the future dividend, as the warrants will not receive any dividends. But SPALI already paid its dividend for last year's operation. The stock just went XD for 0.12 a couple of weeks ago.
While a value investor would usually always stick to the common shares, the warrants seem mispriced to me by trading with no premium over "the in the money" amount.
These top two insiders seem to confirm what I think, the SPALI-w3 are mispriced by not trading with some premium over the in the money amount. Of course for this idea to work SPALI stock has to be a good pick.
After visiting this company again last month, SPALI remains among my top choice in the Property Sector, along with DCC and TICON.
The above was posted in our member lounge just now as well. In a new posting called "Timely Ideas". Make sure you regularly check into our lounge and all should consider contributing so to build our knowledge bank there.
Best Regards,
Paul Renaud.
