"It could be a lesson in the making for stocks like Largo Resources Ltd (OTCMKTS:LGORF). The company recently announced that effective December 3, 2018 the company will permit, without any further action on the part of holders, all outstanding unlisted warrants of the company to be exercisable on a cashless exercise basis at the option of the Warrantholder.
According to the release, no other terms of the Warrants are being amended. However, the stock has been hit in direct response to this announcement. One wonders about the logic here. Clearly, shareholders assumed a dilutive impact. However, the company has advertised this idea as a preventative for overall dilution because the volume-weighted 5-day average price was much higher at the time of the announcement than the minimum strike price for the warrants, suggesting that, in a perfect world, it would take fewer shares to pay off the warrants. However, it isn’t a perfect world, and shareholders have been selling the stock down, and with every tick lower, the dilutive potential of this strategy grows."
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