“Gold Placements”, “Q-Shares” or “Omega Shares” — What’s with this “Warrants” stuff from Casey Research?

What's being teased by Tucker's Strategic Trader?

Today I’m throwing in a little bonus article, since it’s an interesting topic, everyone seems to be obsessed with gold again this week (though gold prices took a little tumble yesterday), and a few folks have asked about E.B. Tucker from Casey Research and his “Gold Placements” pitch. If that doesn’t sound familiar, he has similarly called these “Omega Shares” or “Q Shares” in the past, it appears, though I didn’t write about those ads.

This ad is still dated November 2019, and they’re selling Tucker’s Strategic Trader, though it’s apparently circulating pretty heavily still because I continue to get questions (and they still seem quite prepared to still process your $2,000 subscription — no refunds, naturally).

This is the lead-in that got my attention:

“A few years ago, I worked my way into a tight-knit group of ultra-wealthy individuals and scored the secret to raking in millions of dollars in profits in the gold market…

“If this sounds like the beginning of a suspense novel…

“Brace yourself, because it only gets more interesting from here.

“And during this brief broadcast, I’ll hold nothing back.

“IN FACT, I’ll GIVE YOU MY TOP TRADE RECOMMENDATION TODAY FOR FREE.”

And he gins up the excitement quite a bit…

“… most regular investors have never heard of these Gold Placements… or their secret codes… and couldn’t access them if they wanted to…

“At least not under normal circumstances.

“But with gold taking off – I’ve decided to come forward and share the secret I learned.

“Because the upside is simply too big to ignore.”

What he’s clearly talking about are warrants, which are similar to call options and are generally given to investors as an inducement for them to buy into an equity offering. Most commonly these days they are a part of “blank check” financings, every special purpose acquisition corporation (SPAC) is initially created with some sort of warrant bundled in as a reward for investors who tie up their money in the “capital pool” without knowing when or how it will be invested… but warrants have also been very common in the natural resource space, as a way to reward investors who are willing to risk their money on mining stocks, often very small ones who might otherwise have trouble raising money at reasonable prices.

I confess to having a certain fondness for warrants — I do keep one eye on the list of SPACs and watch to see when interesting ideas emerge, since those are usually the only “mainstream” stocks that have warrants attached, and while most of those don’t go anywhere we do get a shining star every now and again, including Virgin Galactic (SPCE) and DraftKings (DKNG) this year and Hostess Brands (TWNK) a few years ago, just to pull some names from the hat.

If you don’t know what warrants are, just think of it this way — they trade like stocks, but they are mostly like individual options contracts (just without the standardized terms of options). A warrant, like a call option, gives you the right to buy a stock at a set price (the “strike” price), at any point before the expiration date. If you want to do that, you would “exercise” the warrant — though often people don’t bother to exercise their warrants, which takes some communication with the broker and sometimes a fee, they just sell them before the expiration date (hopefully at a profit). Do note that warrants can expire even if the stock is trading above the exercise price — brokers won’t automatically exercise them for you like most brokers will with options contracts, so don’t forget to take action (sell or exercise if it’s “in the money”) before the expiration date. Having an in-the-money warrant expire and become worthless just because you forgot would definitely be a bummer.

Companies sometimes have more than one tranche of warrants, in which case they might give them letters (Warrant A, Warrant B), but they’re usually associated with a financing that the company did and usually set with a strike price that is somewhat above where the stock was when the financing was done — to give the financier a bonus, but not one that’s too easy to reach. There are sometimes terms like accelerated redemptions, or cashless redemption triggers, but unless it’s written into the prospectus they need to get warrantholders to agree to any change in terms — and companies will sometimes offer inducements to warrantholders to get them to exercise the warrant early, both to remove that overhang from the shares and, sometimes, just to raise some cash from the exercise.

Most US-listed warrants are associated with SPAC financing deals these days, but there are some others — there were the fantastic TARP warrants following the financial crisis rescue, which were warrants that banks and insurance companies who were rescued had to give the government, and which the government later auctioned off in public listings (so maybe there will be airline warrants in a few years following however this rescue goes, we’ll see)… and you’ll still sometimes find them in other odd situations — I tend to see them pretty regularly among small biotech stocks, which tend to have the same thirst for perpetual financing as junior miners.

And while they’re not necessarily easy to find from one common listing, there is no ‘secret code’ for locating them. You’ll see them usually with tickers that ad a W or a WT to the standard ticker, though every broker uses a different convention (so the DKNG warrants are at ticker DKNGW in most systems, though you may also see a DKNG-WT or a DKNGw or something a little different). Most Canada-listed warrants just add a .WT to the Toronto or Venture ticker, though they also often have an OTC listing for US brokers to trade. Often, because they’re not standardized, the only place to confirm the specific terms of the warrant is the original prospectus from the offering, though companies often share the basics on their website.

The best free warrant listing I’ve found for Canada is