Join our investing community

I need some help understanding warrants

Discussion in 'Investing Strategies' started by Glebe, 31st Jan, 2008.

  1. Glebe

    Glebe Well-Known Member

    Joined:
    15th Aug, 2005
    Posts:
    932
    Location:
    Sydney, NSW
    Hi there,

    I'm hoping the more educated here could clue me up with warrants. I get the general idea, particularly instalment warrants which is what I'm looking at, but when it comes to the details my knowledge cuts out.

    I'm interested in STWIMF (streettracks asx200 instalment warrrant by Macquarie). Here are it's details:

    Asset Details
    Instalment Type: Resetting - Regular
    Gearing Level: 68% =Current Loan / Underlying Share Price
    Instalment Code: STWIMF
    Maturity Date: 17-11-16
    Next Annual Reset Date: 17-11-08
    Current Loan Amount: $ 37.0000

    Current ASX Market Price
    Instalment Price (offer): $ 21.56
    Underlying Price (offer): $ 54.77

    Income Information
    Next Forecast Dividend Ex Date: 24-06-08
    Forecast Dividend Amount: $ 2.2020
    Forecast Franking Level : 0%
    Instalment Yield To Next Reset: 4%
    Instalment Yield Per Annum: 5%

    Cash Application Information
    Indicative Total First Payment Amount: $ 22.1297
    Indicative Interest Amount: $ 2.8024
    Indicative Holder's Put Option Cost: $ 0.9884
    Indicative Borrowing Fee: $ 0.5689
    Minimum Cash Application: $ 2000

    Shareholder Application Information
    Indicative Cashback Amount: $ 32.6403
    Indicative Interest Amount: $ 2.8024
    Indicative Holder's Put Option Cost: $ 0.9884
    Indicative Borrowing Fee: $ 0.5689
    Minimum Number Of Shares: 250

    OK, the questions I have at this stage are:

    a) what is the implied interest rate? Is it $2.8024/$22.1297 because if so, that's 12.5% :eek: Surely I've got that wrong...

    b) what is the difference between the terms maturity date and the reset date?

    c) what exactly happens on the 17-11-08?

    d) can I hold instalment warrants forever? ie past the maturity date?

    e) the inbuilt interest is a capital cost, not deductible against earnings, correct?

    f) more generally, do people have a preference between Macquarie, UBS and Citibank?

    Thanks heaps!
     
  2. samaka

    samaka Well-Known Member

    Joined:
    30th Sep, 2007
    Posts:
    308
    Location:
    Sydney
    The only one I'm confident to answer :)

    Once you hit the maturity date you then take on the actual share (the warrant ceases to exist).
     
  3. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW