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Magnum Hunter Resources Corp. Message Board

  • analyst112 analyst112 Sep 10, 2013 11:00 AM Flag

    warrants

    Pricing model says they are worth $.95 each. Worth getting them. MHR is on the upswing after a tough year. Things are starting to click. Hope they spin out the pipeline next.

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    • Excerpts:
      On August 26, 2013, management announced a special warrant dividend for common stock holders. In summary, shareholders of record will receive one warrant for every 10 shares of common stock that they own on the record date. These warrants expire April 15, 2016 and are exercisable at a price of $8.50 per share. But they are not exercisable until September 2014 or whenever management files the registration statement with the SEC, whichever is later. The ex-date is Wednesday, September 11th, 2013.

      What this means for short sellers is that if they hold their position through the ex-date, they will be short the warrants as well as the common stock. Therefore, to fully close their short position, the trader will not only have to buy to cover the common shares, but also buy to cover the short warrants as well. Herein lies the problem. The warrants will not be registered under the Securities Act of 1933, so there will be restrictions on trading them. In other words (directly from the press release): "Upon issuance, the warrants will not have an active trading market."

      This is not the first time management has declared a special dividend of restricted warrants. On August 16, 2011, management declared the exact same type of dividend. Those warrants have an exercise price of $10.50 per share, and do not expire until October 14, 2013.

      Conclusion:
      This recent run up in price is more about a short squeeze than a sudden realization of fair value.

      • 1 Reply to nsleesman
      • ht0629@gmail.com ht0629 Sep 10, 2013 12:07 PM Flag

        The recent run up in share price was due to stock moving towards analysts estimates, fair value and selling off non core assets and the recent acquisition of Utica leases at favorable pricing. It was accelerated by shorts covering, the run up in oil price due to the Syria issues, issuing of dividend warrants and some very positive catalysts coming in the not to distant future.

        This pull back was expected and with the oil prices dropping, profits being taken and shorts backing away from covering as hard it knocked the PPS down fast which of course scares people and adds to selling. It will smooth out and as the news comes out the PPS will continue it's climb.

        Sentiment: Buy

 
MHR
4.64-0.42(-8.30%)Oct 22 4:05 PMEDT

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