Yesterday was a good day. The acquisition of Infusystem was approved at long last, so our warrants will shortly be exercisable ­– and have about three years to run. The stock closed down at $4.96, but think about it. Say you kind of liked this business. Would you risk $49,600 to own 10,000 shares of it? Or just $3,900 to buy 10,000 warrants at 39 cents each?

I’d go for the $3,900, both because it’s a lot less cash to have to come up with and because it’s a lot less cash to risk.

My own feeling is that the spread still needs to be wider, whether because HAPN stock goes down a bit more or the warrants go up a bit more, or a little of each.

The black box says that a three-year option to buy a fairly volatile $4.96 stock at $5 is worth about $1.61 . . . except because we give up all the gain from about $8.70* on up, I subtract from that the 70 cents the box says an option with a strike price of $8.70 is worth. So I get a black-box value of about 91 cents for warrants that closed last night at 39 cents. I’m cheerfully holding on.

*I use $8.70 instead of $8.50, even though the company can force conversion of the warrants if the stock closes at or above $8.50 for 20 consecutive trading days, because there’s a reasonable chance it won’t just get to $8.50 and stay exactly there, although it could. Rather, at some point during those 20 days it might hit $8.75 or $9. So I throw in the extra 20 cents as just a guesstimate of what the actual price might reach if there were ever a forced conversion.

I won’t repeat my musings of last week of how the stock and warrant might dance around each other (think of the Earth affecting the orbit of the moon but the moon also affecting the orbit of the earth, until they find equilibrium), but I like to think this business might be worth $6 or $7 or $8 or $9 a share sometime within the next three years. If not, well, we made this bet with money we could truly afford to lose. But if so, it will turn out to have been a good, or possibly a great, lightly-taxed long-term gain.

My final HAPN thought is that, if the warrants stay cheap, or get cheaper, the company itself might at some point buy a few million of them. Why not?

I’m not sure they could actually get many without bidding the price way up, especially once they announced their intention to do so. But say the warrants dipped back to 33 cents. In theory, it would cost the company just $9.9 million to buy all but 3 million of the 33 million that are outstanding. (They’d never get the last 3 million, because you and I own those, “and we ain’t sellin’ for no lousy, steeenkin’ 33 cents.”) It would certainly be a better use of the company’s profits (should they have any) than paying a dividend.

So if the business does reasonably well, there could be all sorts of people bidding the warrants up from here, perhaps even including the company itself.

It’s still a speculation, and we could still lose everything. But if I didn’t already have so many HAPN warrants, I’d buy more at 39 cents.


Tobias Brown: “Just a little tidbit on the issue of people visiting America. I live overseas. A Korean colleague in our office is applying for a visa to visit America. I was stunned to see as part of his application he was asked by the US to provide a list of each visit to each country anywhere in the world he had made for the last ten years. Is it any wonder that he decided to toss in the towel and go to the South of France for his honeymoon? I think this is a perfect example of ‘form over substance’ security post 9-11 that sends a staggeringly negative message to the world.”

Ernst-Dieter Martin: “One easily fixable problem is taking the fingerprints of all visitors. It is right there that you are made to feel VERY unwelcome. Taking fingerprints is something done to criminals in my country, not to our guests. Taking my fingerprints and then offering me free tea wouldn’t improve it a bit. Stopping this practice would save a lot of money and would also speed up the process. The US is the only country doing this to their visitors besides Brazil, who’s taking them only from US citizens (I love the Brazilians for that move).”

Chip Ellis: “Regarding partnering with Disney, it looks like the Administration took your advice before you offered it. From businesswire.com:

October 22, 2007

U.S. Government Partners with Disney to Welcome International Visitors Multimedia “Portraits of America” to be Featured in International Arrivals Areas, U.S. Embassies and Other Venues to Welcome Visitors to the United States

Athena Archuleta is a member of the Pueblo Tribe of Tesque in Santa Fe, N.M. and speaks their native language Tewa. She is one of the many faces seen in “Welcome: Portraits of America,” a seven-minute film and hundreds of still images, featuring American people from all regions and walks of life. Walt Disney Parks and Resorts commissioned the project as part of the Secure Borders Open Doors Initiative, a public-private partnership to improve the entry experience for visitors. . . .

“Travelers form their first impressions of America when they arrive at our borders. Our global reputation therefore depends on making visitors feel every bit as welcome as they feel secure,” said Stewart Baker, Assistant Secretary for Policy, Department of Homeland Security. . .

The film and still portraits showcase the diversity, friendliness and optimism of the American people. The film will be shown in the Federal Inspection Areas of U.S. airports, and in U.S. embassies and consulates overseas, while the still portraits will be incorporated in posters, banners and other imagery welcoming visitors to the U.S. The video and images will not feature or promote any commercial entities. The first airports to feature the images will be Washington Dulles International Airport and Bush Intercontinental Airport in Houston, Texas, to be followed by the nation’s other international airports.

For the project, Disney attracted a world-class creative team including producer Federico Tió, a highly-regarded marketer of some of America’s best-known motion pictures. Born in Havana, Cuba on May 1, 1962, Tió came to the United States on one of the first “Freedom Flights” in 1965. Tió’s crew embarked on a cross-country odyssey to capture the content for the video, including images of ordinary Americans at work, play, with family and at moments of introspection.

Secretary of State Condoleezza Rice and Secretary of Homeland Security Michael Chertoff announced a joint vision to enhance border security while streamlining security processes and facilitating travel for legitimate visitors in January 2006. As part of this initiative, the Secure Borders, Open Doors Advisory Committee was established with participation from the business, travel and tourism and academic communities. One of the goals of the Advisory Committee is to help the Departments of State and Homeland Security establish a friendlier, more welcoming process for visitors from the time they apply for a visa to their entry into the United States.

☞ I’m delighted to know great minds are thinking alike. But it doesn’t sound as though too much progress has been made in 22 months. Maybe it will accelerate from here.


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