The latest TED Conference videos are not yet up, but here’s a recap of one of the presentations – on “angiogenesis” and the anti-angiogens, like berries, that seem to keep microcancers from growing, and the antiangiogenesis drugs that caused tumors in a dog, a dolphin, and a horse, to disappear.
I’m telling you, kids: Floss, and fund those Roth IRAs. With luck, we could be around a long time.
THE FRUGAL HEIRESS: SHRIMP
The frugal heiress made her debut last November with an outstanding submission on an inexpensive New York City hotel. I keep hoping she’ll come up with another, but in the meantime, to keep the concept alive – albeit with a very manly, Cooking Like a Guy™ slant – I want to tell you about colossal shrimp.
There is a tremendous premium placed on colossal shrimp. A pound of colossal shrimp weighs only a little more than a pound of “medium” shrimp, just as a pound of gold weighs just a little more than a pound of feathers*, but there is a big difference.
In the case of the gold, it’s worth vastly more than the feathers (unless they are dodo feathers). But in the case of the shrimp, I would argue that the colossals are worth little or no more than the pound of mediums – yet cost $19.95 (cooked, shelled, deveined, frozen) versus $8.95 for the mediums.
Yet at the end of the day, it’s all shrimp. And – now here comes the frugal tip – if you grab two or three medium tails at once, dipping the duo or trio into the cocktail sauce together, you virtually have one colossal shrimp. I mean . . . what difference does it make? Answer: a difference of $11 a pound. Once a week for a lifetime, compounding after tax at 12%** and beginning at age 21, when the first tranche of your trust funds come under your control, and you’ll have an extra $2,287,704 at age 75 – just by eating smaller shrimp two at a time.
Think about it.
* Just kidding.
** Fat chance.
I last wrote about our Infusystems warrants a few months ago, suggesting that they would likely expire worthless – even though I was keeping mine. If you own some, please take a minute to re-read that item, and then come back here for the news yesterday (much more fully laid out in the SEC filing), that we may now exchange our warrants for stock.
We are faced with three choices:
- Make the exchange at a ratio of 35 warrants per share (so, say, 3,500 warrants for each 100 shares).
- Make it at 25 warrants per share (so, say, 2,500 warrants for each 100 shares) so long as you agree not to sell for six months – clearly the better choice, in my mind, since I’m in no rush to sell.
- Do nothing and take your chances the warrants will be “in the money” before they expire April 11, 2011. Hmmm.
It’s an interesting situation.
For starters, I’m glad to see that the warrants needn’t expire worthless after all. If you bought some and choose to convert (which you must do by March 17), you’ll have what is currently about 9 cents a share worth of stock for each warrant. (The stock closed at $2.25 yesterday.) And if the stock were to hit $4.50 by April 11, 2011, you’d be well on your way to a nice profit . . . whereas, had you not converted, your warrants would have expired worthless.
But there’s a little element of “the prisoner’s dilemma” here, because if everyone converts – except you – it might make sense not to convert. That’s because the company would at that point have about 20 million shares outstanding . . . so if the company valuation reached $120 million (say) – not easy, but not impossible – it would be $6 a share and your warrants would be worth a cool dollar each!
Yet if, like you, who decided not to accept the offer, no one did, the company would have more like 55 million shares potentially outstanding (the 35 million warrants plus the existing stock), and so would need to be valued at $330 million to be selling at $6 a share – not impossible, but nearly so.
My guess is that most people will convert most or all their warrants. I plan to convert most or all of mine.
As a shareholder (I own some of the stock as well as a preposterous load of the warrants), I don’t much care either way:
If no one accepts the offer, the warrants will all most likely just disappear, valueless, when they expire. Which is great, because then that 35 million share potential dilution just disappears. (Anticipating that, as expiration draws near, the stock might rise at least a little above $5, triggering some conversions after all. And that would be okay, too – with each conversion comes $5 in cash into the company treasury.)
And if everyone accepts the offer, that’s fine, too. Given the 25-to-1 ratio, it would dilute my shares only modestly to get rid of this 35 million warrant option overhang.
Quote of the Day
Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.~John Stuart Mill, 1867 (Like shopping centers in the middle of the desert. Or millions of pages of legal documents.)
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