Caution: Warrant holders could sell immediately and push price down
The short term worry is price could be pushed down as warrant holders sell redeemed shares. As posted earlier: "The warrant holders (Hudson and Iriquois) end up with 1.8MM shares instead of 2.4MM, but at a far lower cost basis. They could sell half (immediately) and have a free ride."
While this deal reduces the fully diluted sharecount slightly, the immediate impact would be from a portion of the warrant holders selling their redeemed shares into the market in high volume, considering that average daily volume is small (179,000) compared to the number of warrants being exchanged for shares (millions). Warrant holders are often financiers whose investing thesis is based on turning around profits as quickly as possible then reinvesting in another sweet financing deal. Most are not considered aligned with the interests of retail investors in common stock.
Based on MGT SEC filings, there are NO restrictions on selling common stock shares received after redemption of warrants. It is not true that, "There are also limits to selling the 800k shares. They can only sell a certain amount daily depending on volume." From the 8K dated 10/26/2012, Section which follows after Exhibit A, titled, "Warrant to Purchase Common Stock", page 4 therein, Section 2, titled, "Disposition of Warrant Stock and Warrant", states the following:
“the Holder does not agree to hold any of the Warrant or the Warrant Stock for any minimum or other specific term, AND RESERVES THE RIGHT TO DISPOSE OF THE WARRANT AND/OR THE WARRANT STOCK AT ANY TIME IN ACCORDANCE WITH OR PURSUANT TO A REGISTRATION STATEMENT OR AN EXEMPTION UNDER THE SECURITIES ACT OF 1933”
So this means that financiers who exchange their warrants for common shares may sell as many shares per day as they desire, which may well lead to a suppression of the stock price in the short-term. Note that the 8K dated 4/26/2013 did not stipulate any additional restrictions on the conditions for sale of common stock received from the redemption of warrants.
Uhmmm, you don't have a clue....if they convert, they would have 800k shares free trading and 1 million restricted. We had 900k volume Friday alone.
There are also limits to selling the 800k shares. They can only sell a certain amount daily depending on volume. You won't even notice them selling.