|Shares Out. (in M):||75||P/E||0||0|
|Market Cap (in $M):||1,760||P/FCF||0||0|
|Net Debt (in $M):||0||EBIT||0||0|
Continued improvement of business performance and return of capital via buybacks
As ROE expands there should be mulitple re-rating to peer levels on an ever growing BVPS
|Entry||02/14/2015 01:54 PM|
It strike me that the payoff of buying this call is just the same as owning stock and a $45 put. why is it worth paying $15 for a $45 put struck in 2021? Are you worried the stock is going to tank?
|Subject||Re: Ending Strike Price/Dividend Adj|
|Entry||03/22/2015 12:20 AM|
I get a strike around 37 but its pretty sensitive to your assumptions.
|Entry||07/08/2015 09:53 PM|
Stanley - how do you think about amortizing the time value of the warrant over the next five years?
It doesn't appear to me the warrant pricing is corrrelated with BS model (double entendre intended).
|Subject||Re: Icahn Letter|
|Entry||10/29/2015 11:17 AM|
While not certain, I don't believe Section 4.04 necessarily implies a freeze of the dividend adjustment. If you read to the end of that Section 4.04 it closes by saying in a Reorganization parties will enter into an agreement "providing for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article IV." Article IV contains the two way dividend adjustment mechanism (adjustments to both the exercise price in 4.01 and the conversion factor or number of shares received per warrant in 4.03). This implies that post a Reorg the parties are to provide for continued adjustments (dual path dividend adjustments) to the extent practicable potentially (my commentary) by reallocating the dividend threshold across the new entities in some pro rata manner. While I obviously don't know what form it would take, that last sentence in Section 4.04 tells me they have to work to make the adjustment mechanism close to equivalent to what it was before any Reorg. I would also note at this point that I am not an attorney so you should reach your own conclusions based on the language.
|Subject||Warrant Adjustments - Strike Price & Warrant:Share Ratio|
|Entry||12/17/2015 09:05 AM|
I am posting a similar note for both AIG and JPM warrants. I believe these are uniquely interesting investments. Further, I believe a lack of appropriate attention has been paid to the share:warrant ratio adjustment coming into play for both warrants. This ratio adjustment has a meaningful leverage effect on the warrant return, but has not received a lot of attention.
The warrants ratchet down the strike price for dividends above a specified LTM amount. This is well-discussed. However, there is also a mechanism by which dividends increase the shares received for each warrant [ (beginning share:warrant ratio) * (current warrant strike price) / (newly-adjusted warrant strike price) ].
The annual warrant threshold for AIG dividends is $0.675/share, and based upon the recently increased dividend, the warrant strike price now stands at $44.9036. Importantly, the share:warrant ratio recently ratcheted to 1.002.
As I model AIG through warrant expiration, the warrant strike price decreases to $42.65/share while the share:warrant ratio increases to 1.055. I am effectively utilizing sell-side dividend expectations which equates to a yield of 1.7% to 1.8%. This could prove conservative depending upon the course of AIG's share price and relative capital return between repurchases and dividends.
At expiration, I expect AIG shares to be worth $105 to $120/share. The ratio adjustment would thus represent an incremental $6 to $7 on the current warrant of $23 - an incremental 26% to 30% total return or roughly 200bps annualized.
In my view, the share ratio effect is gravy on an investment that otherwise stands on its own merits.