Exercise your Metro Pacific warrants and earn 335%

James Ryan Jonas

Metro Pacific Corporation (Stock Code: MPI) announced that its stock warrants acquired through tender offer or purchased in the open market can now be exercised and converted to MPI common shares.

The stock warrants, issued on October 23, 2006, can be converted to MPI common stock at a price of P1.00 per share until December 14.

With MPI’s stock closing at P4.35 on December 12, if you converted those warrants, you are are technically earning P3.35 per share or 335% from the conversion price. That, however, is still gross of associated fees, taxes, and the warrant acquisition cost.

What is a stock warrant?

A stock warrant allows its holders the right, but not the obligation, to subscribe to new shares at a set price during a specified period of time.

How do I purchase a warrant?

The warrant is usually offered on a detachable basis and may be acquired in a stock offering or in the secondary market. Several warrants of Philippine companies are traded in the Philippine Stock Exchange (www.pse.org.ph).

How do I profit from a stock warrant?

Stock warrants are convertible to common stocks of a company at a price usually below the current market price. As in the case above, MPI warrants can be converted to common shares at P1.00 per share. With MPI’s stock now trading at P4.35 apiece, those converting their warrants are technically already in profit.

If I bought a warrant, can I convert it to common stock anytime and at any price?

No, the issuing company determines the conversion price and the exercise period of the warrant. In almost all instances, however, warrants are convertible to common stocks after a few months or years at a price higher than the conversion price, thereby ensuing profit for the holder of the warrant.

James Ryan Jonas teaches business management, investments, and entrepreneurship at the University of the Philippines (UP). He is also the Executive Director of UP Provident Fund Inc., managing and investing P3.2 Billion ($56.4 Million) worth of retirement funds on behalf of thousands of UP employees.