Sandstorm Gold Warrants
by dvolonn | April 8, 2012 9:07 pm
I wanted to ask for any advise or insight with my Sandstorm Warrants. I am an American and have the Warrants but was thinking of selling them and buying the stock (SNDXF) which I don’t have any. I was just wondering which is better or if its going to make any difference as I really can’t afford to loose much with this. Thanks for any comments!
Source URL: https://www.stockgumshoe.com/2012/04/microblog-sandstorm-gold-warrants/
Hi David. I personally own both stock and warrants in Sandstorm Gold, in what is now (at current prices) roughly equal portions. I can’t answer questions about personal investment choices or the risks that your portfolio can handle, but I would urge anyone choosing between a stock and a derivative (like a warrant or option) to consider the greater risk and volatility that warrants and options typically carry over common stock — the price moves faster in either direction, and the risk of a total loss is usually higher with warrants than with stocks, and there is less trading liquidity so it can sometimes be harder to sell a warrant in a hurry.
How difficult is it to buy Sandstorm warrants? Thinly traded and easily spooked?
I don’t know if they’re “easily spooked,” but both tranches are thinly traded — SSL.WT.B is hugely out of the money and therefore lower-priced (quite risky, since you’re hoping for a $14+ share price within less than a year — it expires next September). There is sometimes some speculative trading in that when the Sandstorm share price gets active, but there’s a very high risk of it being worthless at expiration. SSL.WT doesn’t expire until 2020 and is in-the-money right now ($4 strike price), so it is far pricier and trades very little. Both are difficult to buy if you’re trying to be diligent about not paying the ask price, and there often isn’t a lot to buy or sell at whatever the current “market” price might be, so you can’t always count on getting a buy or sell of a large position near the most recent price — one person trying to get in or out of a few thousand shares could easily move the price considerably, and there are days when no warrants actually trade. And that’s for the listed warrants in Canada, the OTC trading of the warrants in the US is even a little bit more illiquid.
Here are the specifics from the Sandstorm website about the two warrant tranches that are currently listed — keep in mind that these are also currency plays, since the warrants have strike prices in US$ even though the original and primary listing for the shares is in Canada and it can be difficult for US investors to actually exercise warrants:
SSL.WT.B (expire September 7, 2017) — 5.0 M outstanding — US$14.00 strike price
SSL.WT (expire November 3, 2020) — 5.0 M outstanding — US$4.00 strike price
I currently own warrants from sandstorm gold purchased OTC in the US, ticker SDDXF, strike price $4.00 US, expiration Nov 3, 2020. It was recommended to me from Larry Edelson of Weiss Research and after he passed away it leaves me with some questions.
I spoke to the investor relations of the company to learn more about the warrants. The investor relations of the company told me the warrants cannot be exercised in the US and stated they should not even be traded in the US. Is this a true statement?
Why would anyone want to own a warrant that is nonexercisable? what would give it value if it cannot be exercised?
Is it possible no one will want to buy the warrants even if it is in the money because it cannot be exercised?
The warrants have value because they’re fungible — you can sell them to someone in Canada, and that person can exercise them. No foreign listed company can solicit US investors if they don’t comply with SEC rules, but many of them are traded OTC anyway.
I would make a decision about when to sell at least a few months before expiration, but not worry too much about that rule otherwise — most people sell warrants instead of exercising anyway.