If Tom Brown of is right (big if, click here), it should be selling for about triple the current price.


Fred: ‘Could you make some additional comments about the HAPN warrants? The warrants are at 36 cents and the underlying security is at $5.87. So aren’t we paying 36 cents to buy a security with an immediate 87 cent gain? This is like shooting fish in a barrel! Or is there some concern that the deal will not go through?’

☞ Let me tell you how to shoot fish in a barrel: Buy a barrel, fill it with water and fish – or at least fish – aim and fire. Even that’s not so great, because you will surely destroy the barrel and, likely, the floor. (Best to do this outside.) But my point is: you will not find barrels of fish on Wall Street. A simple piece of grilled Dover sole, by the time you’ve had a glass of wine, some berries, tax and tip, will set you back $50 easy. (Guys, I need hardly mention, do not eat this way. Guys have Whoppers.) There is no free lunch on Wall Street. Am I straying from the metaphor?

In the first place, yes, no deal may get done. Second, once a deal is done, you have to wait four months before you can exercise the warrants. And, third, who knows what a terrible deal this may turn out to be and how low the stock will drop? So ‘tails’ (we’ll get to heads in a second) you lose every penny of the $3,000 (say) you paid to buy 8,000 warrants. Fortunately, you knew to place this bet only with money you absolutely could afford to lose, so you’re philosophical about it – and you get to lower your taxable income by $3,000, making your after-tax loss only $2,000. (For the sake of this example, you are in the 33% marginal tax bracket.)

Heads, on the other hand, the deal gets done, the stock does nicely over the four years the warrants have to run, and, when it hits $11, you exercise (buying the stock at $5 and selling it at $11), turning each 36-cent warrant into a $5.64 lightly-taxed long-term capital gain -$38,000 or so after tax.

Unlike a heads-or-tails coin toss, there are more than two outcomes. (Here’s a third: the deal gets done but the stock is just $5.36 when you go to exercise your warrants -you break even.)

And unlike a coin toss, the odds are not easily quantifiable.

My gut tells me the odds of the stock hitting $11 in four years are better than 1 in 19. And yet, using this example (which I picked out of the air; there is no special significance to $11), you do 19 times better, after tax, if the coin comes up heads than if it comes up tails.

So I’m in – but only with money I can truly afford to lose.


David Plumb: ‘So, are you going to the Borealis Annual meeting in Gibraltar on June 27, or voting your proxies?’

☞ You’re joking, right? (But, sure, it’s fine to send in the proxies and vote with management.) Apparently, they plan to webcast the meeting. Just head over to the Borealis site a day or two beforehand for details.


Steve Baker: ‘For your information the Toronto Stock Exchange bought the Vancouver Stock Exchange about 5 to 6 years ago and promptly changed its name to the TSE VENTURE Exchange. [Which accounts for your confusion over the ‘V’ in the AXI-V symbol.] While there have always been more than some problems with the exchange, especially in the junior mining area, it should also be noted that it has always acted as a true junior exchange and usually in any given year 10-15+ companies graduate from the Venture exchange to full blown listings on the TSE. In some years more than 30 companies have migrated to other exchanges (either Montreal or Toronto).’


I suppose you saw this about preliminary interest in building a gay bomb. The ultimate ‘make love, not war’ tactic, I guess. I don’t imagine anyone actually took it seriously, but apparently it did get run up the flagpole.

Monday: Alison Goes Green; You Go Purple


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