SANDSTORM OPTIONSIs there is any advantage in keeping SDXXF or SNXXF at this point or just sell them and buy SAND?
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Everyone has to make those choices for their own accounts, but trying out some scenarios can help to visualize what might happen.
For example, if SAND goes to $17 before April 2014 for the SNXXF (SND.WT) warrants, that would mean the warrant should be break-even at $2.80, which would be a gain of 35-40% from the current price. SAND is at $13.75 now, so that would be a gain of $3.25 per share, or a gain of 24%. So in that scenario the returns are similar.
If SAND goes down, and is at $10 at expiration, that would mean that the warrant should be worth about $1.40, a loss of a little more than 30%. The shares falling from $13.75 to $10 would be a loss of 27%. Again, fairly similar — though with gains or losses that are substantially more than that kind of 20-40% move, the leverage becomes gradually more dramatic for the warrants.
Both those are for the regular warrants, which take five warrants plus $3 to make one share. Different calculations for the other two warrants that are publicly traded (both with later expirations) are on Sandstorm’s site here: http://sandstormgold.com/investors/warrant_info/
There are other things to consider as well: If the warrants are out of the money and the company is taken over at a price below the strike price, the warrants are worthless — that seems unlikely but is certainly possible. And if Sandstorm Gold starts to pay dividends, the warrants would not earn a dividend — I expect that we’re still a couple years from that happening, but that’s just a guess. Currency impacts the warrants too, since they are primarily traded in Canadian dollars but the strike price of the warrants is in US dollars. Finally, the warrants are expressly not intended for non-Canadian investors, and non-Canadians can’t easily exercise them and might be exposed to more risk for that reason — which is more of an issue now that the common stock is US listed.
That’s my two cents, anyway. I own both warrants and equity, though I scootch the weighting of my holdings around from time to time and have been considering taking some profits on the warrants since we’re now at only 18 months to expiration.