To All Readers,

First and foremost thank you for all your overwhelming reads and responses to my first ever blog post. For all your question, comments, and criticisms, I will address it in the upcoming posts.

However, for todays’ post, I would like to dig further on the issue of structured warrants for Gloves stocks and why it may impact the downtrend that we are seeing today.

Looking at the calendar, today, the 18^th Dec 2020, might be just another Friday to all of us, but today is also the day when one of the warrants, issued by MACQUIRE, SUPERMX-C82 is due. Some facts of SUPERMX-C82:

(https://www.malaysiawarrants.com.my/tools/livematrix/710682)

As you can see, SUPERMX-C82 exercise price is RM1.10. This warrant was issued prior to COVID-19 when no ASPs were seen on the gloves prices (hence supernormal profit).

Helping our good friends at MACQUIRE calculate their settlement price today:

https://www.malaysiawarrants.com.my/pdf?type=termsheet&id=710682

Average Price @ close* for last 5 days = RM 6.864.

Calculating their Cash settlement amount:

40m Shares * RM 6.864-RM1.10 X 1/1.75 = RM 131.75 million.

Yup. that much.

Now, the higher the closing price of the last 5 days prior to call date for the warrants, the higher the cash settlement amount for the bank.

Is MACQUIRE the only bank that made this blunder? Of course not. For SUPERMX, these call warrants were all issued (and have not reached call date) with pre covid-19 price in mind.

C91,C96,(CIMB) and C87 (KENANGA).

Plotting it on a Horizontal timestamp on my Tradingview. You can see why it the path is not rosy for the banks

Now, the question is, did the banks learnt their lesson Post Covid-19?

Of course, that’s why they are the sharks and we are the bilis. (anchovies).

Plotting issued warrants post covid price, here the banks gives us the clue of the exercise price they expect to pay out for the warrants.

Remember, these are all conservative pricing (bank Margin of Error). If the Share price at that point is more than the exercise price, the banks will be stuck IN-THE-MONEY again and they must pay out huge amounts of money for the warrant holders.

But for us bilis, this exercise price is indicative of the real target price the bank is setting for gloves manufactures post Covid, regardless of their other reports.

(https://www.malaysiawarrants.com.my/tools/warrantsearch)

Highlighting SUPERMX-C1C, Issued by the same IB MACQUIRE, They will not make the same mistake again.

Expiring on the 29 Jan 2021, the exercise price for SUPERMX is RM 11.44.

And going down further the list, the banks are revising newly issued warrants with target price for SUPERMX accounting for the supernormal profits.

End Game 

The supression of price could highly possibly be a systemic effort to reduce the settlement the banks have to pay for the warrants. (this is just my hypothesis, I don't have concrete evidence supporting this notion).

At the current low price for gloves shares, it is wise for us to grab its bulls by the horns and not miss this excellent opportunity to make money.

I hope this post is useful to all of you.

Have a great weekend.