VSOLAR-WA was trading at a premium of -25%. This implies that one could earn 25% by simply buying the warrant and converting it to the mother share, with the condition that the mother share price remains unchanged. A few years in KLSE, I can still see new things by now, how exciting is the stock market?
How can I come to know this stock? Well it occupied a conspicuous spot in the trading platform -- most actively traded counter. While a negative premium is certainly "attractive", let's have a glance at its financial summary first:
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| Financial summary for VSOLAR (Source: Malaysiastock.biz) |
As you can see, this company has no fundamental and it is not making any profit. The table below details the price of both VSOLAR and VSOLAR-WA with its premium, and how the negative premium "quickly vanished", turning into positive premium. (Historical price obtained from KLSE.my)
| Date | VSOLAR | VSOLAR-WA | Premium |
|---|---|---|---|
| 22-4-2015 | 0.380 | 0.165 | -25.0% |
| 23-4-2015 | 0.340 | 0.150 | -20.6% |
| 24-4-2015 | 0.360 | 0.145 | -26.3% |
| 27-4-2015 | 0.305 | 0.140 | -13.1% |
| 28-4-2015 | 0.250 | 0.110 | -8.0% |
| 29-4-2015 | 0.255 | 0.115 | -7.8% |
| 30-4-2015 | 0.255 | 0.110 | -9.8% |
| 5-5-2015 | 0.260 | 0.110 | -11.5% |
| 6-5-2015 | 0.210 | 0.090 | 0% |
| 7-5-2015 | 0.205 | 0.085 | 0% |
| 8-5-2015 | 0.210 | 0.080 | -4.8% |
| 11-5-2015 | 0.170 | 0.070 | 11.8% |
| 12-5-2015 | 0.155 | 0.065 | 19.4% |
| 13-5-2015 | 0.155 | 0.075 | 25.8% |
| 14-5-2015 | 0.155 | 0.070 | 22.6% |
| 15-5-2015 | 0.145 | 0.070 | 31.0% |
What is left now? Nothing. If there is no improvement in the fundamental of this company, I do not think the price will go up in the "foreseeable future".
You may want to ask: why does this happen? The big fish wanted to sell the shares. Making the warrant to have a negative premium is very easy to attract people to buy, because everyone is hoping that the warrant will "catch up" with the mother share to its reasonable price. Obviously the opposite happened in this case.
While everything written here is in hindsight, I did not touch this stock though. The purpose of writing this is to alert fellow investors and not to fall into this trap in the future.
http://chonghe-investment.blogspot.com/2015/05/klse-vsolar-wa-with-negative-premium.html
