Extending the warrants itself is the same as an insider purchase, which is why she had to file the form 4. If she got the same terms as everybody else did when they extended their warrants it would be harder to complain. She got a very special deal which nobody else probably could have even been offered and was at best was only partially and very badly explained in the form 4. Without clear coherent explanation this reads as nothing more or less than a give away of 29M new 3 year warrants as long as they will not be exercised between now and November.
One could argue that the company knows that the stock will be highly volatile during the period to November, and hence that giving up the right to exercise any warrants and sell shares deprives LP of significant opportunity to profit from such volatility. The biggest problem with that is first that it was not explained and no numbers were released. Maybe the worst part of the explanation as it was written in the form 4 is that the form 4 asserts that giving up the right to trade the 29M shares is the compensation for extending them. That is logical nonsense because until the warrants were extended beyond May 2, the right to exercise them beyond May 2 didn't exist so the form 4 asserts so traded something non-existent for a very real extension and valuable which is a complete logical absurdity.
Also, asserting that you know that the stock will rise above the warrant strike price before November actually changes the value of the warrants considerably from something that appears to be worthless on a 6 month forward basis to something that certainly does have value. But if such value actually exists at this point of time then the warrants being extended instead of being extinguished do have a lot more value than is apparent.
In any case something very real and potentially very valuable was given away to Linda in exchange for something of only very theoretical value; and look, to me as a long, she was indeed given 3% of the company if the shares ever become worth much more than .30 in the next 3 years against value that the company apparently gives to not being able to exercise some unknown number of warrants (beside the 29M which were extended, of course, because it would be patently absurd to use non-exercise of those warrants as having any value whatsoever as a bargaining chip vs them not expiring on May 2 and that absurdity is part of what makes me angry about this and the way in which it was only very partially disclosed and then disclosed in totally absurd language, namely that non-exercise clause on the extended warrants creates any value vs their not being extinguished immediately).
It remains to be seen whether the guarantee not to exercise or trade against some undisclosed X number of warrants over the period between now and November is worth anything at all. Let's assume for the sake of argument that this worth something; what it is worth depends in large part on the number and strike price of said warrants. The value being asserted depends on the stock price trading a lot higher and with very high volatility during the period to November. It's nice to hear that might be true but at this point, I have been anticipating that for a very long time and it hasn't happened so making that assertion as a value in exchange for giving away ownership rights to the 3% of the shares of the company for a fixed price for 3 years into the future troubles me considerably.
Given all the history of the last 5 years at this point it seems at best quite arrogant to assert that the shares will be highly valuable between now and November, at least enough to make the promise not to exercise some unknown number of warrants valuable enough to justify granting Linda new 3 year warrants for 29M shares. I believe that the B-S value of those warrants is considerable even with the shares now trading 20% below the strike price.
