So Gibbons thought all this warrant/shorting I was refering to was all nonsense- Not the brightest guy...What a moron. Here is the link
Quipt: Warrant Overhang Creates Attractive Prices (NASDAQ:QIPT) | Seeking Alpha On June 2, 2021, QIPT filed its March 31 quarterly report with the SEC. As of March 31, the number of warrants outstanding would result in an additional 2,491,106 shares being issued to shareholders on a stock that, until recently, was illiquid, often trading fewer than 100,000 shares per day between the US and Canada. The exercise price on the warrants, post-reverse-split, is CAD $6.40, or roughly $5.20/share USD.
So, these warrants have been in-the-money since November 2020, and were well in-the-money since about February 2021. The exercise and sale of the warrant shares has been weighing on the stock ever since, and has only intensified as we near the expiration date of June 29, 2021. Let me explain for those unfamiliar just how much of an overhang these warrants can create.
Much like a stock option, warrants give the holder the option to buy stock in QIPT at a specified price by a specified time. However, unlike an option, the warrant is essentially “free” to the original warrant holder. In the case of QIPT warrant holders, they received these warrants in exchange for purchasing common shares of QIPT stock during the company’s last capital raise. In this case, warrant holders can purchase shares of QIPT for $6.40 CAD. This creates a unique opportunity for the warrant holder. How?
If I hold a warrant to purchase a share, then I know I can buy the share at any time prior to June 29 for $6.40 CAD. Therefore, if the stock starts to trade at $10/share CAD, as it did earlier this year, I can short the stock at $10 (or any price above $6.40) with no risk. Why? Because I know I can buy the shares back to cover my short position at $6.40. Even if the stock goes up to $1,000/share, I can cover my short position at $6.40 instead of the current market price, making a profit between $6.40/share and the price at which I shorted.
So, at any price above $6.40/share CAD, a warrant holder can guarantee they make money on the warrant by shorting the stock. It is for this reason that warrants are so valuable. In having a warrant, you expose yourself to zero extra risk (beyond the risk of the original transaction) for possibly significant upside reward.
Based on multiple conversations with people familiar with QIPT, as well as people familiar with this warrant hedging process, I believe the current warrant overhang/hedging is weighing significantly on QIPT’s share price. This argument seems to be supported by the evidence, as well, since I noticed that IIROC’s short reports indicate increased shorting activity picking up drastically on QIPT over the past month. Yet, there are several changes the company has recently made that may also be weighing on shares, despite the fact that the company remains fundamentally stronger than ever and these changes are all beneficial for the business long term.