Interesting that IRDM warrants were trading at such a premium to intrinsic. Look at ROICW, the warrants there trade at less of a premium, are deeper in the money and have almost 2 years remaining until expiration. I would not be surprised if an exchange offer (not of the IRDM, equal swap variety) is coming shortly. ROIC, is an under-levered REIT and comps (KIM) trade at a 3.7% dividend yield. REIT index trades around that yield as well. ROIC would trade at $15 on that basis without even levering up more. With leverage, they could probably support an $18 price (do your own diligence, just my opinion). Strike is $12 on the warrants and expiration is August 2014. Current warrant price is ~$1.15. ROIC trading at $13, so $1 of intrinsic, $0.15 of premium. Warrants are a value at these levels, in my personal opinion.
Edge - I like your idea. I'll point out that being an reit and paying out 90% of earnings obviously hurts the warrant. The idea, as I'm sure you know, is that the reit is less likely to appreciate the way an iridium might. Of course a lot of reit's have proven this wrong. TWO for instance. But, if you look at two.ws, they trade with no premium. Less time though. Reit investors want the dividend and aren't interested on a bet on price appreciation. Also you can't short the common because of the dividend.
Yes...it's definitely a play on multiple expansion and increased leverage rather than retained earnings/internal compounding. To give you an idea of their leverage potential...as of last Q they had $175M drawn on their term loan and credit facility. Their expanded borrowing capacity under the term loan and facility are $600M (which includes accordion feature, $400M without). Book value of equity is $450M...so, for a REIT they are highly unlevered -- only 26.5% debt to total cap (as of Aug 30). Their borrowing costs are LIBOR + 155 bps. They are buying properties with 7.5 caps and claim room for 100bps improvement on that, so you can see how that is accretive...especially since they could theoretically do it entirely with debt at this point. It doesn't take a genius to figure out how that works itself out into a dividend. The company has stated that they will pay out 70-80% of FFO.