A warrant is versatile trading instrument which gives investors the right (but not the obligation) to initiate exposure to a stock at a predetermined price at some date in the future. In this way, warrants are similar to stock options. But warrants differ from stock options because they are issued by the companies themselves and they involve the creation of new shares for future transactions.
Warrants are sometimes included as part of an IPO as a way of raising confidence or attracting investors to the offering. A well-known example of a warrant issuance occurred during the government bailout of Chrysler in the 1980s, when the the company included 14.4 million warrants as part of its $1.2 billion federal loan agreement. The Chrysler warrants came with an exercise price of $13 and were offered when the stock was trading at only $5 per share. The company may not have though share prices would actually rise that high but the stock actually surged above $30, costing Chrysler $300 million and driving strong gains for taxpayers.
Provectus Biopharmaceuticals, Inc. (OTCMKTS: PVCT) may be in a position to generate even more substantial returns if valuations are able to trade back in-line with their historical averages.
The Knoxville, Tennessee pharmaceutical company recently announced that they have been granted orphan drug designation (ODD) by the U.S. Food and Drug Administration (FDA) for small molecule oncolytic immunotherapy PV-10. The treatment is used during neuroblastoma treatments in pediatric solid tumors. Provectus has managed to show significant improvements in its per-share earnings performances over the last two years, and the company is expected to show evidence of profitability over the next few quarters.
The Provectus Biopharmaceuticals warrants trade on the OTC market under the symbol “PVCTW” and are convertible into common stock at a strike price of $0.85. The expiration date for the warrants is not until June 19, 2020. Provectus has traded with a somewhat volatile history but with current valuations trading at extreme lows, this type of price behavior may actually work in the favor of the bulls. Positive news releases an improvements in earnings per share increase the chances for profitability in the position.
A similar valuation story can be seen with Optex Systems Holdings, Inc. (OTCMKTS: OPXS), which manufacturers precision optical sighting systems for military and commercial applications. The company recently announced the addition of over $7 Million in new contracts during the fourth fiscal quarter of 2018. Most of these contracts deal with the construction of Laser Protected Periscopes but also include deals for Non-Laser Protected Periscopes and various Sighting Systems.
The Optex Systems warrants trade on the OTC market under the symbol “OPXXW” and are convertible into common stock at a strike price of $1.50. The expiration date for the warrants is not until August 26, 2019. While the stock has seen significant declines during the last decade, consistency in the company’s order backlog suggests that we could see valuations turn up again from their currently depressed levels as we head into next year.
Disclaimer: The author and Spotlight Growth has no positions in any of the stocks mentioned in this article. Nor does either party currently have any relationship, or any other conflicts of interest, with any of the companies mentioned in this article. This content is meant for informational and entertainment purposes only and should not be meant as a recommendation to buy or sell any securities. Please visit a licensed financial representative to determine what investments are right for you.
Article By: Ric Cox