AND IF VOTER SUPPRESSION (yesterday‘s column) DOESN’T WORK . . .
How about election fraud? Robert Kennedy, Jr. has a new piece in Rolling Stone. His previous piece detailed how the Republicans kept 350,000 votes from being cast or counted in Ohio, which likely determined the outcome of the 2004 election. This one makes the case that electronic voting machines can’t be trusted.
These pieces are painful to read because it is almost paralyzing to imagine how much better off the world would have been if the 2000 election had not been systematically stolen in Florida (in large part by the Florida Secretary of State, who simultaneously co-chaired Bush’s Florida campaign committee) or if the 2004 election had not arguably have been stolen, too (in large part by the Ohio Secretary of State, who simultaneously co-chaired Bush’s Ohio campaign committee).
But those – of either party – who care about democracy should read these pieces and work for reform, because without verifiable elections, there is no democracy.
Yesterday the Aldabra warrants closed up 7 cents, at 92 cents, with three quarters of a million of them trading hands, while the underlying stock closed down 3 cents at $5.67 on volume of just 9,200 shares.
Someone apparently agrees with us that the warrants were priced too low relative to the stock. Even now, buying the warrants at 92 cents means paying only a 25-cent premium over their intrinsic value. (The warrants, you will recall, allow you to buy the stock for $5 any time between now and February, 2009.)
It’s great to see interest in the warrants, but over the long run, for this to work out, the stock has to go up too. Indeed, for now, the bargain-priced warrants may actually be sapping demand for the stock. Right? If you liked the stock, why would you buy it? Might you not buy the warrants instead?
Yes, you pay an extra 25 cents over their intrinsic value to buy the warrants. But instead of risking, say, $56,700 to buy 10,000 shares, you would risk $9,200 to control 10,000 shares, getting to keep all but $2,500 of any profit that might accrue.
Your loss, in case this goes south, is limited to 92 cents instead of $5.67; and you can control a lot more shares, for a given investment, in case it should happen to go north.
Not to say this speculation is in any way foolproof. If the stock fell to $5 by the time the warrants expired, they would expire worthless (the right to buy a $5 stock for $5 is worth nothing) – a 100% loss.
And as February, 2009, looms, if a zillion warrants are exercised with the idea that their holders will immediately turn around and sell the stock to take their profit, that won’t work out so well, either – a ton of selling would presumably depress the price of the stock.
In fact, even if the warrant-exercisers don’t rush to sell, the company’s earnings per share will be diluted by all those newly issued shares. (Silver lining: the company would be taking in $5 for each warrant exercised, a nice boost to its liquidity.)
If we’re lucky, the premium on the warrants will widen to the point that people who like the stock will decide to just buy the stock, rather than pay a wide premium to buy the warrants.
And if we’re lucky, the fundamentals of the company will be such that, in 2009, no one who does own shares will want to part with them for less than $7 or $8 (or more?) per share. I have zero expertise to make the case this will happen – but it could. So I’m hanging on.
Now go read that Rolling Stone article. If democracy is worth so much blood and treasure fighting for in Iraq, it’s worth a few minutes reading about in America.
Quote of the Day
In 1800, 75% of [an American's] working man's expenditures went for food alone. By 1850, that had dropped to 50%. Today it is a little more than 11%.~The Wall Street Journal, September 20, 1996
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