Warrant - cash back? - Aussie Stock Forums

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  1. #1

    Default Warrant - cash back?

    I have 4000 PDN shares I held for over 2 years now which I am now sitting on a nice profit. I understand that some warrant providers offer to "cash back" on this shares and transfer them to warrants. In that case I would cash back some of the money I have on the 4000 PDN and get instead 4000 PDN warrants.
    I am thinking to do that with PDNJMD. Does anyone know how it works? It sounds interesting to me as I understand that the money that I would cash from this transaction would not be taxed.
    Can anyone explain their experience or what they think about this warrant cash back thing?

  2. #2

    Default Re: Warrant - cash back?

    Not 100% sure but thought cash out option was for installment warrants only.
    Best speak with the issuer
    Never argue with an idiot. They bring you down to their level and beat you with experience.

  3. #3

    Default Re: Warrant - cash back?

    Sorry for the late response to this.
    You are in effect getting a loan over the shares to the tune of about* $7.25 per share.
    What you are looking at is called Cash Extraction. I have done it so far with two things (IAG) and Telstra and turned them into rolling instalment warrants.
    The ones you mentioned (PDNJMD), the J letter in the fourth position shows that it is an Instalment warrant but a European style (not American) which means that they can not be exercised (ie turned back into full shares by paying off the "loan") until their expiry date - 30/6/2008.
    In the meantime, once issued, you do not have to wait till this date if you don't want to keep them, you can sell these warrants on the market - the current price for them is valued at $5.05.
    You can see the different warrants over PDN on the ASX site http://www.asx.com.au/asx/markets/Wa...27&DataSet=PDN
    Warrants are a complicated exercise but they do have lots of material to read up on the ASX site and on the sites of the different issuers and the ASX issues a booklet. You have to have signed a special agreement saying you understand all the issues regarding warrants before you start dealing in them (and that includes getting cash extractions).
    Warrants are a good way to gear if you don't have enough shares to do margin lending or take out a loan. Your gains are multiplied but equally important, your losses are also magnified. However you do get the same dividend you would have if you held that many shares.
    When special events take place however you may be treated differently than ordinary shareholders. For example I held Suncorp warrants when they merged with Promina and instead of getting extra warrants (or shares) they changed the exercise price (loan amount) should I ever convert them to shares. (I didn't, with some extra buying when they dipped alarmingly, I sold them all for a profit later making 25% plus the dividend)!
    The warrant you mentioned was issued by Macquarie Bank (you can tell as the 5th letter is M) they have lots of information on their site also.
    I am commenting on another thread about one of the problems I have found recently with one of the issuers.
    I only started dealing in warrants this year and have done lots of free courses on line, attended some seminars and read booklets. Some say you should only deal with brokers but it can be done online if that is how you trade but there are some pitfalls which I will also discuss in the other thread.

    * There are lots of factors included in exactly how much you get back per share and you need to get a quote.

    I hope this info helps, but this is one area where you really need to do your own research and study!

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