At a unit price of $0.50, the implied value of a share of ETRM is $0.18, with the Series A. Warrant having a FMV of $0.32. Therefore, a number of the buyers of the unit offering are likely shorting shares of ETRM as a hedge. At a stock price of $0.32, the implied value of a share of ETRM is also $0.32, with the Series A Warrant having a FMV of $0.18.
Your points are well taken. Unfortunately, the management team is trying its best to emulate the keystone cops. Their "financial advisers" don't appear to be much better.
The company looks to raise $35 million in capital and then pulls the offering, albeit due to pressure from the Nasdaq. A few days later they look to raise $16 million of capital. What happened???? The near-term capital needs of the company suddenly got reduced by 50% over the past week. Just another #$%$ moment.
Your question begets multiple questions. Understand your frustration, but you need to put your emotions aside. While hindsight is always 20-20, the primary question in my mind is whether this problem is the result of either (1) a significant fundamental change in your original investment thesis (management, product, competition, etc.) or (2) ineffective risk management, or a combination of both.
I think ETRM is an interesting company, but I knew when I made my initial investment (August 2013 @ $1.03) that it was HIGHLY SPECULATIVE. I place a huge premium on risk mitigation when it comes to portfolio management. I size all of my positions based on my level of conviction (upside vs. downside) and then beta-weight them. With a beta of 3.0, my original 20,000 share position is in reality, 60,000 shares. In addition, I used options, selling puts and covered calls, as a partial hedge and to lower my effective cost which currently stands at $0.75 / share. At the time of my investment, I viewed my maximum upside #$%$00 with a downside of $0.00 and mean expected value of $2.00. At the end of the day, I was willing to risk $15,000 to make $40,000 with maximum upside of $100,000 over a 2-3 year time horizon.
It sounds like this was more of a risk management problem for you. You thought you were originally risking "X" when you bought your shares, but in reality it's "3X" on a beta-adjusted basis. It's a moot issue at this point. The real question that remains is whether you believe that there has been a fundamental change in your original investment thesis. If so, sell it and move on. If not, it's certainly cheaper today than it was a week ago.
"again, if you were a wall street capitalist, would you buy shares for 87 cents
when you can buy millions off the street for .59 and less?"
I assume your "financial education" does not include options valuation including Black-Scholes. The company is selling UNITS which are comprised of 1 share of stock, 0.5 Series A Warrant and 0.5 Series B Warrant. Stock currently trading at $0.60 while the theoretical value of the Series A Warrant and Series B Warrant are approximately, $0.36 and $0.14, respectively. $0.60 + (0.5 * $0.36) + (0.5 * $0.14) = $0.85.
Maybe you should change your avatar from sillyoldqueen to DUMBASAPOST.
"They are buying in at .87 and warrants at over a buck and people are selling in the .70's? That makes no sense at all. I just saw 100k trade at under.75. Who would do that???"
It's simple arbitrage. Investors can purchase a unit at $0.87 which consists of one share of ETRM plus a Series A warrant to purchase 1/2 a share of ETRM at $1.00 plus a Series B warrant to purchase 1/2 share of ETRM at $1.09. The Series A warrants expire in 42 months (I assumed 12/30/18) and the Series B warrants expire in 12 months (I assumed 6/30/16).
Using a Black-Scholes valuation model, the implied value of the Series A and Series B warrant is approximately $0.26 per unit, with a volatility assumption of 100%. Subtract the $0.26 from the offering price implies a value for the stock portion of the unit of $0.61. That's why some investors were selling ETRM shares in the 0.70s.