Newstrike Brands Ltd NWKRF

Can anyone explain this ?

[321Blastoff]

Apologies in advance this is a somewhat long but hopefully thought provoking post.

In February of this year (3 months ago) Newstrike completes a bought financing deal with a group of underwriters who purchase @ 73 million units at $1.32 raising somewhere in the area of @ $100 million.  Each unit purchased consists of 1 common share and 1 warrant with an exercise price of $1.75 and expiry of Feb 2020.

Almost imediately after which HIP.WT becomes available at .07 per warrant on the TSXV.

SO:

The underwriters immediately opt to sell the warrants they received as part of the bought deal ?
Why ? Virtually no time has elapsed and the warrants could prove to be incredibly profitable for them if they just hold them until they are in the money.

Or else where do these HIP.WT warrants come from ?

I can only assume that the warrants are the very same from the bought deal and the underwriters have held onto the majority and we are seeing a very small fraction of those warrants being passed around among the public. Who knows, maybe when the price of HIP.WT was @ .23 the underwriters let go of some more warrants and made a few dollars to offset their inital investments. It is all highly speculative and there could many other scenarios I suppose.

So let's agree that the warrants are the same from the bought deal. Why does Newstrike choose to list the warrants in the first place. They will not benefit financially will they ? The warrants have been granted to the underwriters and I assume have become their financial property. So then this listing must be at the request of the underwriters ?

As a public shareholder we are suddenly let in on the possibility of an option which was previously only for insiders. The deal seems pretty good too ! The strike price is not scarily far from the share price at the time of issue and there are 2 full years for it to be in the money. So we buy our warrants.
How does our purchase affect the financial bottom line of the company if the warrants are the property of the underwriters ? In fact if the price is to suddenly surge above $3 and remain for over 10 days the company has the option to call an early end to the life of the warrant.

So if the ratio of a consolidation is say 5:1 and the share price reacts accordingly the warrants are in peril of becoming obsolete if the company utilizes their option which in turn forces the hand of the shareholder to exercise the warrant. This infuses the company with more money but most likely only momentarily as people exercise their warrant and then cash out selling the shares they have just  received. Remember those who have 100,000 warrants will need access to $175,000 in funds to exercise the warrants. After which they will have made a tidy profit of $3.25 per unit. It seems to me that anyone with any sense will just turn that around and become liquid again.

So my fear is that at best the share price will be falsely increased and for only a very short period after which it drops back to where it was and we hold one fifth of the shares we had before.

So what does consolidation really promise ? Of course I suppose there are other possibilities but this is the one that has me very concerned. It would therefore be prudent in my opinion to wait and see how the share price simply reacts to the financials I had hoped for from the company in the first place.

We are in a good place. Why shake things up ?