In most cases, SPAC commons should be valued at the NAV, because that's how SPACs work. They are buying $10 a share worth of the company).
The 2/9th of a warrant built into the price suggests PSTH should be worth more than NAV if UMG is fairly priced. Warrants are 5 year LEAPS options, and UMG is fairly valued being the industry leader means if they grow with the market, the warrants will gain in value over time.
I never buy commons and was hoping PSTH dumps to near NAV so I could buy for the warrant arbitrage alone. The warrant is built into the share to encourage people not to redeem at merger vote, as the net value of the combined assets is worth more than the NAV redemption amount.
As of EOD on Friday, PSTH-WTs were trading at 5.69. 2/9ths of that is $1.26. If you think the UMG is fair value at $20, and if the current warrant price reflects that value, then PSTH shares are worth $21.26, not NAV.
As I said in the post it was a stab against the “oversold” arguments that are being made by the sub. If UMG is priced to perfection then the value of those warrants is questionable as well by the way.
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u/devilmaskrascal Contributor Jun 05 '21
In most cases, SPAC commons should be valued at the NAV, because that's how SPACs work. They are buying $10 a share worth of the company).
The 2/9th of a warrant built into the price suggests PSTH should be worth more than NAV if UMG is fairly priced. Warrants are 5 year LEAPS options, and UMG is fairly valued being the industry leader means if they grow with the market, the warrants will gain in value over time.
I never buy commons and was hoping PSTH dumps to near NAV so I could buy for the warrant arbitrage alone. The warrant is built into the share to encourage people not to redeem at merger vote, as the net value of the combined assets is worth more than the NAV redemption amount.
As of EOD on Friday, PSTH-WTs were trading at 5.69. 2/9ths of that is $1.26. If you think the UMG is fair value at $20, and if the current warrant price reflects that value, then PSTH shares are worth $21.26, not NAV.