I was confused at first why HMNY would allow note holders to convert their warrants into shares, outside of the originally agreed upon note agreements. It's clear now. The provisions set forth in the 8-K released on 6/29/18 references that the Holders cannot sell these shares from now until a period ending on the earlier of (x) July 23, 2018 and (y) the Stock Split Stockholder Approval Date, and again not after 15 calendar days after the stock split or the July 23rd date. In other words, they are allowed to sell these shares right after the reverse split.
The provisions in the SEC filing also notes if the share price goes above 50 cents (adjusted for the reverse split), the Holders can sell.
Additionally, the SEC filing notes the Holders can use these shares to cover for short sales. This is beneficial if the Holders shorted HMNY and wants to "lock in" their profit by using these shares to do so, thereby shorting in a box, until market conditions confirm which way the PPS is headed. In other words, after the reverse split, if the PPS starts dropping, the Holders can immediately sell their 22,617,879 shares, and keep their short positions and make money and never have to worry about their warrants again. If the PPS starts going up, they could keep their short in a box and not lose money, and then once the price hits 50 cents, they can start selling these 22,617,879 shares, thereby making money without an exercise price required. At that point, they could cover their shares, and in theory still be ahead.
This is a win-win for the note holders. In fact, this would be bad for shareholders because if the PPS tanks after the reverse split (typically it does as people panic sell), the Holders can dump 22,617,879 shares and add to the selling pressure.
There's no good news from this.
