Unveiling Undervaluation: A Financial Analysis of GLASS HOUSE BRANDS INC Warrant
Own $Glasf at a discount?
Dark illiquid Warrants from $GLASF are trading about 46.05% lower than its calculated theoretical value.
In my quest to uncover undervalued opportunities within the stock market, I've honed in on the GLASS HOUSE BRANDS INC warrant. This American-style warrant, with its allowance for exercise before expiration, presents a unique case of undervaluation that merits a closer examination. Not only does my analysis reveal its undervalued nature at a current price of $6.4, but I also embark on calculating the implied volatility based on its market trading price of $0.75, offering a window into market perceptions and potential mispricing.
Delving Deeper into the Warrant's Valuation
Leveraging the Black-Scholes model for a foundational understanding, I calculated the theoretical price of the warrant, arriving at approximately $1.52—a figure starkly contrasting with its market price of $0.82. This discrepancy underscores the warrant's undervaluation but also invites questions about the volatility assumptions within the market's pricing.
Lets assume the warrant can be value as a LEAP option:
Current Spot Price of the Underlying Asset: $7.09
Strike Price: $11.5
Risk-Free Interest Rate: 4.14%
Time to Expiration: 1.94 years
Volatility: 62.89%
The theoretical value of the LEAP option, according to the Black-Scholes model, is approximately $1.52. This reflects the value of a long-term call option given the specified parameters, highlighting the impact of the underlying asset's price, time until expiration, volatility, and the risk-free rate on the option's theoretical price.
When are you using as the expiration for the warrants? The expiration is June 2026, not January as some platforms claim. These were five year warrants after the de-SPAC. This means they expire at the end of June of 2026.