If you’re unfamiliar with warrants, they have many of the characteristics of a call option. More specifically they trade like LEAPs, or long-term options. Each warrant has a strike price and an expiration date like an option. But unlike an option these terms are not standardized. The company sets the terms when issuing the warrant.
Let’s take a look at three OTC warrants that may be undervalued right now.
Interspace Diagnostics Group, Inc. (OTC Pink: IDGGW):
Interpace Diagnostics (OTC Pink: IDGX) warrants trade on the OTC market under the symbol “IDGGW”. The warrants are convertible into Interpace common stock at a strike price of $1.25 and most recently traded at $.15. The expiration date for the warrants is not until June 20, 2022.
With Interpace trading recently at $.96 it is unusual for a warrant with over four years before expiration to trade at such a low premium. Though thinly traded, even as recently as late 2017 the warrant traded at over $.40.
Interpace is in the business of providing molecular diagnostic tests. These tests help avoid unnecessary surgeries and allow a physician to deliver a better level of care.
Interpace announced last month that their tests will now be available to one of the largest integrated health care systems in the U.S. With continued news like this even a small move in the common stock could cause a large move in the Interpace warrant.
Tetra Technologies, Inc. (OTC Grey: TTTNW):
Another OTC warrant which may be a value in hindsight is the Tetra Technologies, Inc. (NYSE: TTI) warrant trading under the symbol “TTTNW”. The Tetra warrants are exercisable at $5.75 and expire December 14, 2021. They last traded at $1.15.
If oil continues to rise, Tetra warrants will be a major value play. Tetra performs a variety of support services for the oil and natural gas industries. The stock has risen along with the oil rally, and appears to have recently broken through resistance at $5.50.
The warrants traded to $1.80 as recently as February 2017 and could easily retrace back to that level as the common rises.
Sunworks, Inc. (OTC Pink: SUNWW):
Finally, let’s take a look at the warrants of Sunworks, Inc. (NASDAQ: SUNW). The OTC warrants trade under the symbol “SUNWW”, and most recently traded at $.13. The warrants are exercisable at $4.15, and expire on March 9, 2020.
Admittedly these are a little more of a longshot than our other two warrants. But, the company traded in the $4 range a few years ago.
Sunworks just lined-up a $3.8 million loan to recapitalize. And, $750,000 of that loan came from two current officers of the company. As the founder of the company is retiring, these executives are willing to put their personal money into the company.
The Sunwork derivatives don’t need the stock to return to $4 to see a bump. The low price of the warrants, combined with even a small move in the stock, could lead to a nice return in the warrants.
Each of these three OTC warrants could see a bump in short order. They each offer unique value propositions in their own right.
Disclaimer: The author and/or Spotlight Growth has no positions in any of the stocks mentioned in this article. Nor does either party have any relationship, or any other conflicts of interest, with any of the companies mentioned in this article. This article is meant for research, informational and entertainment purposes only and should not be seen as a recommendation to buy or sell any securities listed. Please visit a licensed investment representative to determine if any investment is right for you.
Article By: Steven Adams