VHC Management ; Read This Post
Way back on November 30th last year the brash Ming brashly suggested in post 35009 that VHC borrow monies and use those monies to pay a distribution to shareholders. Since VHC has no net earnings and profits it would be a nontaxable return of capital whose only effect to shareholders would be that they reduce their shares' cost basis by the monies so received. The impetus for doing that would be to force the shorts to pay a like amount to those whom they sold the shorted shares. That could incline them to instead cover before the ex-distribution date.
Ming is still crying into his pillow mourning the fact that VHC has not actually done this to date but all is not lost. Now Ming has generously decided that VHC should issue warrants to all shareholders allowing them to buy stock at some future time at a given price. The only immediate cost to VHC would be to register the warrants so they could trade as are options albeit on the stock exchange as does VHC shares. An audit of shares outstanding would also be needed.
Those warrants would have value. Right now a close analogy for valuing them exists on the options exchange. So if the warrant was to allow one to buy VHC at $30 by the third week of January 2015, the comparable option now trades at $3.70 bid and $4.50 ask. Admittedly if by that time VHC was above $30, exercising would be dilutive to VHC. Perhaps a $40 buy price would be better. That option for 2015 trades at a bid of $2.35 and an ask of $2.45.
Given that VHC has a bit more than 51MM shares issued and outstanding, a warrant could be given for every 20 shares held. That would mean 2,550,000 warrants would be issued. Since about 36% of outstanding shares are shorted 918,000 warrants would have to be acquired in the open market by the shorts for delivery to those to whom they sold those shorted shares. Moreover, their exposure to a rise in VHC's share price would rise by almost a million shares. If a warrant was issued for every ten shares rather than every 20, they would be on the hook for almost another two million shares and the exercise price upon which they would have to deliver shares would be set by the company, not by them, as would the date of the warrant's exercise. All that additional exposure and uncertainty could cause them to fold their tent before warrants are actually issued.
Needless to say the deserving Ming looks for no emolument nor accolades in proffering this suggestion although he realizes it would be churlish of him to deny Kendall the pleasure of stuffing Ming's Christmas stocking to overflowing with stray certs were he so inclined as one can only assume he would.