The public warrants have an additional redemption clause with a clever formula that took hours last night with the help of an industry vet of two decades.
X = (number of warrants * (FMV - Exercise price)
(1,000*($17.50 - $11.50) = $6,000
Y = FMV or $17.50
Number of surrender warrants -> 1,000 - 343 = 657
If we look at the prices into the close:
Receiving 343 shares and theoretically selling at the market: 343 * $25.79 = $8,845.97
Note that I used the 10-day SMA, but the stock has been rising, so the 10-day SMA going back three days would yield a lower FMV; hence the approximation.
The question becomes: Is this a good deal? Are the warrants discounted?
Answer: It depends.
The higher the fair market value, the fewer shares you'll surrender. That isn't necessarily a negative thing, as long as the price of the stock continues to rise. But if the fair market value used in the equation is higher than the price of the shares when you receive them (likely some five to seven days after the redemption process officially begins, possibly longer) the net value could be significantly lower than the market value of your warrants before the process began.
Therefore, until we know the FMV used in the redemption equation, we're left guessing. There is a sweet spot for each FMV, but the easiest way to think about it is the closer the FMV is to price, the lower the discount and the higher the risk. As FMV climbs (which it continues to do), the higher the risk shares could sharply reverse during the period of exercise while stock is in transit.
Again, I believe the higher the FMV and the more vertical the price action, the higher the risks I see in owning the warrants into the redemption period. We may find folks panic with their warrants upon receiving the notice, they dump them on the markets, and a better risk-return opportunity arises. In hindsight, the stock is the better play.
The good news is the warrant is down $2.72 today, while the stock is down $4.51, so if someone bought the warrant as a proxy to the stock, they can swap over and net out ahead in exposure. Wednesday, when the piece published, the warrants were $4.13 higher, but the stock was $8.71.
This is a rare time when the error may have actually saved money for those who want exposure; however, if you are playing the warrant for the "discount" know that your discount could be 50% or you could be paying a premium of 25% to 50%. I took my lumps on the warrants, swapped into some stock and adjusted my puts to ratio put spreads after making the decision there are too many unknowns in the warrants right now to take that chance.