There are 3 noteable exercise
routes that can be taken and and a large number of combinations of these.
1. Sell as many shares as warrants you hold in order to take cash off the table.
A defensive play by a warrant holder who keeps the same number of shares but wishes to take some cash out.
2. Sell as many shares are required to pay for the larger number of shares bought through the warrant exercise.
A bullish play as the warrant holder is increasing the number of shares they own but not increasing their cash investment.
3.Not sell any shares, and exercise the warrants.
A very bullish play as share ownership is increased and more cash is invested in the company.
It should be recognized that some warrant holders may have sold shares they own some time back and may therefore exercise their warrants now to keep their share ownership. Condsider someone who had 100,000 shares and had a further 100,000 warrants. This person may have thought the if they sold their 100,000 shares as the share price rose from $.50 to $5.00, that they still effectively owned 100,000 shares due to their deep in the money warrants. Now that the expiry date is upon those warrants, that person would now exercise the warrants to keep their 100,000 share exposure. This is effectively situation 1 above with a long time lag between the selling of shares and exercising of warrants.
I'll call this route 1 b.
So it could be the case that many of the warrants set to expire may be exercised either through 1b,2 or 3 above. Only case 1 results in a 1 to 1 ratio of share sale to warrant exercise at the time of warrant expiry.
AI
