Asia Entertainment (NASDAQ:AERL)

The GeoTeam® is monitoring the warrants of Hambrecht Asia Acquisition Corp. (OTCBB:HMAQF) and CS China Acquisition Corp. (OTCBB:CSAQF). Both companies have entered into business combination agreements with Asian firms.

We are hoping that the respective warrants will provide similar arbitrage opportunities as TMI and HOL warrants have thus far.

Investors need to be aware of possible amendments that could negatively effect the value of the warrants. One common example is an amendment to increase the warrant exercise price. Also, the arbitrage strategy fails if shareholders do not ultimately approve a business combination within a certain allotted time.

See research note for TMI arbitrage strategy
See research note for HOL arbitrage strategy

Hambrecht Asia Acquisition Details

We have emailed Hambrecht Asia Acquisition Corp. requesting information on its proposed business combination.

Underlying Symbol- AERCF
Warrant Symbol- AERLF

Possible arbitrage strategy if shareholders approve the proposed business combination

Data to be considered:

• Current Price of Common Stock: $7.73
• Current Ask Price of Warrants: $0.55 (warrants have a wide bid/ask spread)
• Strike price of Warrants: $5.00
• Implied intrinsic value of warrants: $7.73 - $5.00= $2.73

Strategy

• Buy the warrants at current price of $0.55.
• If the business combination is completed and the warrants become exercisable then the warrants should approach the implied intrinsic value.
• Profit = (New Value of Warrant, Properly Priced) minus $0.55.

CS China Acquisition Details

Underlying Symbol- CSAQF
Warrant Symbol- CSAXF

Target Firm- Asia Gaming & Resort Limited, (See Release)

Asia Gaming is an investment holding company. The principal business activities of its wholly owned subsidiaries are to hold Profit Agreements with VIP Room gaming promoter companies and to receive 100% of the profit streams from the Promoters. The Promoters currently participate in the promotion of two major luxury VIP gaming facilities in Macau, China, the largest gaming market in the world.

See incentive financial targets.

Possible arbitrage strategy if shareholders approve the proposed business combination

Data to be considered:

• Current Price of Common Stock: $5.70
• Current Ask Price of Warrants: $0.44 (warrants have a wide bid/ask spread)
• Strike price of Warrants: $5.00
• Implied intrinsic value of warrants: $5.70 - $5.00= $0.70

Strategy

• Buy the warrants at current price of $0.44
• If the business combination is completed and the warrants become exercisable then the warrants should approach the implied intrinsic value.
• Profit = (New Value of Warrant, Properly Priced) minus $0.44