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. ​​