Cytodyn Inc (CYDY)

[woodenbear]

IMO the short squeeze is coming. Probably not until after 6/12. Insiders and big investors converting warrants was a big show of confidence from the top to lead the way for others to follow. The company knows they need to convince investors something is coming soon in order for them to convert.

This transaction serves several objectives: raises capital with much less dilution, absorbs future excess share supply (as warrant holders sell shares to self fund warrant exercises), and further limits share supply with lock up period. All of these things set the stage for SP to actually respond with good news instead of hitting an endless supply of shares sell below $.55 after 6/12.

Let’s say only 30% of outstanding warrants convert (although I personally think that is low) they raise around $15mm or so with 66% less dilution then Paulson raises. It also prevents the ability for investors to rinse and repeat given the 6 month lock up and will limit supply for that time period. Compounding this impact is that obviously many warrant holders are self funding these warrant exercises, which is why SP tanked after announcement. I believe this will continue after CC unless huge news is provided. While this is hard to swallow in short term, it will be very beneficial after 6/12. As warrant holders essentially swap free trading shares for cheaper locked up shares.