Ann: MGF Fund Update - February 2021, page-189

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lordsmasher

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08/07/21

12:30

Post #: 54368997
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Originally posted by xFireStorMx: ↑

Hi CatTrader,

It's a simple calculation that you can apply to work out the current 'intrinsic value' of the option. Current MGF NTA = $1.946. The options can be converted to MGF at a 7.5% discount to NTA = $1.80 exercise price on MGF options (MGFO). The current MGF share price is $1.795. As it stands today, there is no intrinsic value in the options - it is cheaper to buy on market.

It's simple maths to say that if the discount closes such that NTA = share price then there is 14.6 cents intrinsic value in the options. You could either pay $1.946 via the market to buy MGF or you can pay 14.6 cents for the MGFO and then convert them to MGF at $1.80 - total price paid $1.946 either way.

Today, MGFO is worthless if you are seeking to convert it today. You would pay more to buy MGFO plus convert it then you would pay if you bought on-market. However, there is a time value element in the option - given there is a 3 year time-frame whereby the discount could close. If this occurs the option is potentially worth multiples of the current 2.7 cents MGFO price.

Ultimately up to each individual to assess the likelihood of that occurring. It is definitely an educated guess (aka. speculation) and it would be a highly risky strategy to put too higher % of your portfolio into such a bet. For example, I hold three times as much MGF & MHH as I do MGFO. Whilst MGFO could potentially double / triple / quadruple, it could also expire worthless if the discount to NTA remained.

DYOR and seek personal financial advice - this is purely my opinion and not intended to be advice for any other person.

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And yet 100k options were exercised yesterday. I wonder who gets the excess payment, the fund or the manager?

MGF Price at posting: $1.79 Sentiment: Buy Disclosure: Held
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Ann: MGF Fund Update - February 2021, page-189

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