Are Warrants Dilutive? There seems to be confusion on the board, as to whether or not warrants are dilutive
We are hearing very clearly that some are stating it is not.
My understanding is that It can be.
But don’t listen to me, as you’ve heard, I don’t know anything-
So...
What does the literature say?
“When someone exercises a warrant, however, the company issues more shares and then sells them to the warrant holder for the strike price. As the strike price is less than the market price of the stock, this dilutes the interest of the existing shareholders.”
https://www.equitymethods.com/articles/understanding-warrant-dilution/
When the strike price is less than the market price... this Dilutes...
ok so let's hear more..
"
Unlike options, warrants are dilutive. When an investor exercises their warrant, they receive newly issued stock, rather than already-outstanding stock. Warrants tend to have much longer periods between issue and expiration than options, of years rather than months. "
https://www.investopedia.com/terms/w/warrant.asp
And...
https://corporatefinanceinstitute.com/resources/knowledge/valuation/dilutive-securities/
Now as to the question is whether or not the warrants that are being exercised, or giving funds to the company, the answer is yes. Of course.
An important point however, is if the strike price of the warrant, is seven cents or eight cents here, but they are being sold at a profit at $.20
again-this was stated above
unless I understand this incorrectly
What does this mean?
If the intrinsic value of the company is above the strike price, wouldn’t that be expected to dilute the existing shareholders?
It is possible to sort this out by calculating the value of the warrant:
How to value the warrant?(and its dilutive effect?)
Try the Black Schoales method :
C=SN(d1)−Xe−rTN(d2 )
https://www.investopedia.com/articles/trading/10/warrants.asp
If you were issuing stock and a price of seven cents, and it’s selling at $.20, what do you think is going to happen?
Bottom line: do you own due diligence
Don’t trust what you read on the Internet board, especially my assessment (as you have all heard I am the idiot or many other things ...) nor should you trust any of the promoters here.
If you look at the image below however, you can see in the green where the stocks have been bought, by insiders , and the red is where they are sold. You need to do the calculation to see the difference, and then add this back to the shareholders , or do the BS method and impute to figure out exactly where we stand.
As I said earlier, I like to wait for the quarterlies or annuals to sort out the net net, but perhaps someone here wants to do the math
https://www.tradingview.com/x/VH8g1B4d
all IMO fwiw -which as stated here is best ignored