Replies to post #21605 on lowtrade

[lowtrade]

CASHLESS exercise

A subject I didn't talked about during this post on warrants.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=61548041&txt2find=warrants

Didn't you wonder if there were 300k warrants, why did the shares owned only reach 104k? If they only exercised 104 warrants how could the company have no remaining warrants outstanding.

Cashless warrant exercise is a way to own stock without spending the cash needed to buy the warrants. What actually happens is the warrant holder uses a broker/dealer to complete the total warrant exercise on margin. (they borrow the cash to buy) then when they own the 300k shares. They sell the portion needed to cover marging expense & any fees or taxes involved with the transaction.

In order for this to be possible, the ability to do so, is included in the original warrant issue funding deal. You don't see this permission given very often with exchange companies, but it happens on the OTC more often.

The main reason I'm posting about this subject is because of the negative implications [I think about] when I see the company give premission for cashless warrant execise in their funding package.

IMO it shows a desperation for the funding money and signals the company is not after funding for growth as much as saveiour. This would cause me to have concerns about the company I am researching.

If a VC asks for cashless warrants, IMO it means the research they did on the company, tells them they shouldn't feel positive enough about the company, to spend more cash in the future, to keep the company going. They just want to cash in on any future increase in share price for a quick ROI.

If warrants are exercised with a cashless deal, dilution has already taken place and you could expect the shares held, will be dumped soon after.

So in the future, if anyone is researching filings and sees cashless exercised warrants issued, IMO worry about the company strength and possible dilution down the road.

VCs which hunker up new cash funding to exercsie warrants, believe in their investment. An normally hold shares purchased.