Thursday 12 July 2007

A Pity the Stock Market isn't always Logical

Last year I bought some shares in a private equity company (IPE) because it was trading at a discount to it's float price of $1.00 when it was largely sitting on cash in the bank plus some general stock market investments. Since the general market had gone up since it's IPO it had a book value above $1.00, so it seemed like a sure thing. So far, so good, and I've made a bit of money with the stock now trading at around $1.05.

The odd thing is that I also bought some options on this stock, which entitle purchase of the stock at $1.00. The options expire in October, so they should still have some time value, and with the stock now trending up they should be worth at least the stock price - $1.00. However, IPEO is still trading well below the price I would expect, at around 2.5c/3.0c. I already have 54,000 of these options, but I think I'll buy another parcel, just in case the underlying stock keeps going up towards $1.10 or above, which should push to options to around 10c.

We'll see how it turns out.

Copyright Enough Wealth 2007

1 comment:

Anonymous said...

Looking at the NTA there's plenty of value left in IPE and with the switchover from listed equities to private equity over the past year I reckon it's a sound investment. Plus the bonus of being able to register interest in any IPOs that are brought to market!