Wave Systems Corp. (fka WAVXQ)

[dig space]

Not to beat a dead horse on Warrants and Options,

But …

If you assume double counting of shares in volume reports as is generally claimed here then something like 25m shares traded in Q1 with 5.28m shares of Warrants and Options being excercised … if sold that would be 20% of the shares traded (essentially being dilution) in a Q where the stock opened at 1.41 and closed at 4.03.

For Q2 it would represent 25% of the shares traded.

Alternatively, a good chunk of the 9.5 million shares of warrants and options in Q1 and Q2 were used to provide a good chunk of the liquidity on the 11 million share Russel day … which if one again applies the double counting rule turns into 5.5m shares roughly equaling the spike in short interest.

And on taxation:

“If a warrant is investment-related, the stock takes a basis equal to the warrant's exercise price, plus any value attributable to the warrant on the initial offering. There is no taxable income to the warrant holder on exercise. The holding period for the stock begins on exercise. Any gain on the ultimate disposition of the stock is capital gain (short-term or long-term, depending on how long the stock was held).”
http://www.allbusiness.com/accounting/corporate-taxes/4003096-1.html

I don't think the Russel rebalancing was a "warrant holders abruptly decided that the Russell rebalancing" thingy, folks know this is going to happen.

If my hypothesis is true, then the rocket fuel ain’t there …

There are many stocks that had a developing companies that had a huge spike in short interest on Russel day as they do every year. Methinks this is a common thing that requires little close monitoring and gives a chance to book things as long term (representing a 20% cushion against the intervening long risk).