I got to see Michael Moore’s new movie, SiCKO, last night, which opens a week from Friday. Run don’t walk. This movie is going to be huge – and have a huge impact. At the screening I attended, 1500 people were on their feet cheering through the entire credits.
GLDD WARRANT REDEMPTION
This one has worked out well. If you paid 70 cents for ALBA (now GLDD) warrants at the end of April, 2006, you are sitting on a nearly 7-fold long-term capital gain. It’s probably time to sell much or all of it in the next few weeks (read on).
If you bought more August 4, at 36 cents, the gain is 13-fold – but still short term. Should you wait until it goes long-term in August?
Well, you can’t. The company has announced it is redeeming the warrants no later than July 19. That gives you two basic choices: sell between now and then (even after ordinary income tax at the top bracket, it’s close to a 9-fold gain); or pony up $5 a share to exercise the warrants (and start the year-and-day long-term holding period ticking all over again).
If you happen to be rich, especially if the alternative would be to pay short-term capital gains, I’d pony up the $5 a share, exercise the warrants, and wait a year or two or three, hoping to sell at $12 or $15 or something like that. If things go badly – well, you’re rich. Who cares?
But if the plot plays out as it may, with dredging appropriations restored to historic levels, leading to more work at higher margins, then you will have paid $5.36 (the 36 cents you paid for the warrant plus the $5 you kicked in to exercise it) for what might be a $12 or $15 stock. No ‘nine-fold gain, that,’ of course; but still not bad.
Indeed, if the stock stayed where it is for a year a day from the time you acquired it by exercising your warrant, you would have ‘made’ the same absolute gain ($4.32, based on last night’s close), but by paying 15% long-term capital gains instead of 35% short-term, say, you would have made about a 10% after tax return by tying up the extra $5 along with the $3.17 after-tax bird in the hand you left in the bush.
If you’re not rich, just grab most or all the gain, maybe exercising a little just to keep enjoying your association with this lovely little investment.
(I’m a little rich, so I plan to sell what remains of the warrants I have that have gone long-term, as well as some of the warrants that will still be short-term, exercising the rest. How many? Well, not so many I’d be too overweighted in this one stock.)
Hugh: ‘I’m just a truck driver but right now I’m sitting on over $80,000 gain on GLDDW.’
☞ Music to my ears.
From an Advanced Explorations press release:
TORONTO, ONTARIO–(Marketwire – June 14, 2007) – Advanced Explorations Inc. (the “Company” or “AEI”) (TSX VENTURE: AXI) is pleased to announce that the Company has completed establishment of a 40 man exploration camp on the Roche Bay, Nunavut iron ore project. The Company has mobilized two drills to site and the contractor (Boart Longyear) is expected to have the first drill coring by the end of this week and the second drill early next week. The Company objective is to complete a minimum of 15,000 meters of drilling before the end of the exploration season.
☞ Who knows? This is a whole lot riskier than owning shares in the nation’s largest dredging company. But if we’re lucky, a few years from now we’ll have the last laugh. And if we’re not, we won’t care, really, because we only invested money in this one that we could truly afford to lose.
ALISON GOES GREEN; YOU GO PURPLE
Okay. I promised it for today, so here it is – tomorrow.
Quote of the Day
Every debt is ultimately paid, if not by the debtor, then eventually by the creditor.~Jim Grant
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