The “re-IPO” will just be an offering of existing shares held by the hedge funds that won the bankruptcy bid.
In a real IPO, the company creates a big block of shares worth X% of the total company, then sells that big block to the underwriters (think Goldman Sachs).
The underwriters then go around and sell off the shares to big funds that want them in sort of an auction.
Based on that auction process, an initial share price is set, and the stock starts trading.
The only shares are the ones owned by the big funds, and the public wants them, so usually the price pops on IPO day and the big funds all make a big profit.
Sometimes existing management also includes some of their shares in the IPO block given to the underwriters, but it’s the same process.
In this case, the company isn’t issuing any shares. They are all already held.
3% of the total shares are currently trading on the OTC market.
The rest are locked up, and can only be traded privately between big firms.
Once they list on an exchange, the other 97% will become publicly available.
The big firms that own them can sell them to the public, just like how a normal IPO works.
It’s like a normal IPO, but instead of company issuing new shares, the shares are already held by the hedge funds that won the bid, and they will be selling some.
What that does to the price in the short term… who knows. Probably a lot of volatility. I’m guessing the public shares are a bit overvalued right now because only 3% are trading and the public buyers are mostly retail (pension funds don’t trade on the OTC markets), and retail investors are the least well informed players in the market. That would explain why the warrants are so cheap relative to the shares right now. But a listing also means a lot more demand, because a lot of big money that can’t buy on OTC will be able to buy again, so it could send the price up too. It’s not so much about how many shares are available, because the shares already exist, but they are in lockup. It’s not dilution in the real sense.
Disclaimer...from a recent Reddit post.
