MVIS and MVISW

MVIS and MVISW

on June 01, 2006

I got this email today from a friend of mine:

I am writing to correct a bit of thinking on the warrant comments you had on the blog.

A warrant holder is subject to call at the company's discretion as indicated in your blog as you reference the offering prospectus. However, a warrant holder is NOT necessarily capped on the upside versus those holding the stock. A warrant holder, on the notification by the company to force the exercise, can take several actions:
1. sell the warrant in the open market
2. exercise the warrant, pay the exercise price and take the stock.

The warrant holder is only limited in upside if they choose not to pay the exercise price and sell the warrant before the call is finalized. If the company forces the warrant exercise, the company will receive the cash from the 10.8mm warrants being exercised and will issue 10.8mm common shares. After the call is effected, the warrant will cease to trade. Thus, a holder would not choose to sit and do nothing.

Currently, one could purchase warrants at 0.60-0.65 with an exercise of 2.65, or a total potential cost of 3.25-3.30. Why purchase the warrant vs. the common stock? Answer - either more leverage or less downside risk (in dollar terms for the same number of shares)

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