At the Money Warrants

Question for anyone who thinks they know the answer… while I understand the academic value components to a warrant trading at the money (no intrinsic value plus a reducing time premium), I’m wondering if exercising at the money warrants of a thinly traded company moments before they expired would be more advantageous than letting the warrants expire and purchasing the company’s shares on the open market at the same price. The key here is “thinly traded company”. Assuming you were looking to take a large position in a company for 50% of the stock’s daily trading volume and you were positive that doing so would drive up the price of the stock (as it likely would). However, if instead you purchased the warrants and exercised them, would you not benefit from locking in theprice you are paying (ie. the exercise price) vs. trying to buy on the open market and running up the stock price? Anyone?

Sounds great except usually if the stock is thinly traded then the warrants are ultra thinly traded. I guess you should consider the dilutive effect of the warrants vs. buying existing shares… if there is one.

good point, now assume you already owned the warrants from a debt issue you participated in awhile back (ie. the warrants were attached as a sweetener at the time of the debt issue).