Regarding the warrants and the recent block trades and volatility:
1. My understanding is that there are 11.4 million warrants held by investors with the remained held by SPAC management and the underwriters of the SPAC.
2. Only the SPAC management and underwriters can use cashless exercise.
3. Of the 11.4 million investor warrants, most of these warrants are now concentrated and held by a few large warrant funds or other derivative type investors.
4. I believe that, the holders of the investor warrants DO NOT want to excerise - in fact, they cannot due to the charter and purposes of their funds - they do not buy and hold stocks and many do not have the capital to excerise.
5. Therefore, Asia Gaming must market the company to develop interest in the stock and warrants so that new buyers can come in (the company recently attended the Global Hunter China Conference in San Francisco).
6. In essence, between now and October 28, 2010 (the last date to exercise the warrants), the company is effectively attempting a $57 million fund raise (11.4 million warrants times $5.00 per share exercise price).
7. Given the strong fundamentals of the company, the company should be able to transition the warrants to holders that are interested in actually owning the company shares.
8. However, in the meantime, the warrants are likely to be under significant pressure as the buyers understand the current warrant holders desire to sell.
9. Based on recent volumes, a lot of warrants still need to be placed in fundamental investors hands.
10. So in the near term, these structural issues (SPAC warrant structure legacy), will trump fundamentals in my view.
11. So, if you are a fundamental investor that can own this stock between now and until after October 28th, there is a significant opportunity to buy the warrants cheaply as the investor warrant holders exit.
12. AERL Stock Report - an interesting write up that does a nice job of a general summary of the company, the opportunities it has, the warrants, and provides earnings estimates.