The ERHO have an exercise price next year of 10 cents, but you also get a 3 year 'piggy back' option on conversion exercisable at 20 cents.
Those 'piggy back options' would have a lot of value given an exercise price of 20 cents, being currently 5 cents in the money-allowing for volatility would be worth somewhere between 10-15 cents IMO (could not be bothered with a Black Scholes simulation!).
Working backwards, you buy the existing ERHOs and exercise for 10 cents you get a 25 cent share in return (using prices at 11.20AEST today!). Plus a 'piggy back oppie worth 10-15 cents. You outlay the exercise price of 10 cents for a 35-40 cent return?
The ERHOs are therefore worth approx the ordinary share price (25-30 cents) given the leverage through the exercise price and the 'piggy back' oppie!
A strange beast indeed.
Needless to say am now long ERHOs-must have stuffed up the calcs somewhere?
Cheers,TAS
ERH Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
