I'm trying to get comfortable with the new issuance that will come from the exercise of the warrants. Two questions:
1. Now that the $12 strike price on the warrants has been hit, why isn't ROIC using the full number of outstanding warrants (around 40MM, I believe) in the denominator of the dilution equation instead of the much lower 1MM number they are using?
2. The description of the 8MM warrants issued to insiders at the time of the IPO (they were priced at $1) says they are to be exercised on a "cash-free basis". What the hell does that mean? Can they simply declare "exercise" and surrender their warrants and receive shares without paying anything for them?
I think the cash free exercise means they get the net amount (difference between share price and exercise price assuming it is positive) per warrant but it is delivered in shares rather than cash. So, if shares are trading at $13.00 and holder has 10,000 warrants at expiry they would get net value of $10,000 in shares issued at current market price ($10,000/13 = 769 shares).
If what you say is true, ROIC would not receive any cash, right? If so, I don't think that is correct. Tanz has said more than once that they view the warrants as a future source of raising additional equity.