"any reasonable person would simply sell the warrant and then buy the common if the common popped to $55 in a year"
Yes. Which also means that at least half of the posters on this board would convert the warrants instead.
The warrants are 1-1 at $45.00 so if the stock is say at $50.00 by the time they are due you only make $5.00 correct? How much time value do they keep and why would anyone buy them from you for a premium if the stock is already trading at $45.00
Just trying to see the logic sorry if I don't know what I am talking about as I have never traded warrants.
and only 75 million warrants, of which Bruce Berkowitz owns about 25 million, so relatively small float... if AIG buys back a lot of shares and treasury is out by end of year (and markets stay about the same), $20 easy
I don't agree entirely. If I recall the strike price on the warrants is $45 so I would not expect the warrant to move dollar for dollar with the stock until the stock crosses over $45. That said, a $10 move in the stock is only 33% and the warrants will generate probably twice that return. A good comparison might be like using margin to double your holdings without the interest charge and the fear of a margin call.