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  Title	How to navigate stocks with altnernative cashless warrants. i.e. $SPGC $ACON $AEON
  ID	7714377
  External ID	1jbhdj9
  Author	warrenpuffetts
  Published Date	March 14, 2025, 6:21 p.m.
  Summary	Found this very useful guide from Dilution Tracker about this kind of stuff. Good to view it in 3 distinct phases so you know exactly what's about to happen ahead of time. Just need to check the meeti
  Tags	None
  URL	https://www.reddit.com/r/pennystocks/comments/1jbhdj9/how_to_navigate_stocks_with_altnernative_cashless/
  Sentiment	Negative: 0.09811    Neutral: 0.86980    Positive: 0.03209
  Relevance	0.02905

• Content Details

  Content ID	5019626
  Key	b9e19316-f4e2-41f6-8f5a-f61a8fb817e5
  Content	Found this very useful guide from Dilution Tracker about this kind of stuff. Good to view it in 3 distinct phases so you know exactly what's about to happen ahead of time. Just need to check the meeting dates from the proxies to know what's coming up. # TLDR: * Companies desperate for money will issue alternate cashless warrants in financing deals * These warrants contain complex reset mechanisms that effectively allow the holders to get more shares without additional cash payment as the stock declines, making them a form of death spiral financing * The stock initially drops on the announcement, but will have occasional bounces and further drops after key registration and approval hurdles are met * This article goes over the timeline of a company that issues cashless warrants so you can navigate similar situations in the future # Background Companies issuing alternate cashless warrants have accelerated in 2024-2025 as some traditional nano cap financiers have pulled back on their deal making volume. This left a vacuum in the supply of capital to nano caps while demand for capital is still high. Given this imbalance, the deal terms for many nano cap financings now include lucrative alternate cashless warrants with reset clauses which effectively guarantees profit for the funds that participate in the deal at the expense of existing shareholders. # What are Alternate Cashless Warrants? Alternate cashless warrants in simple terms allow the holder of the warrant to receive shares ***without any cash payment*** for each warrant they exchange. For most deals, the terms are set such that the ratio of shares received per warrant typically range from 1-3 shares received per warrant without additional payment. # What are Reset Clauses? In addition to the 1-3x multiplier described above, the base multiplier will also increase if certain "Reset" conditions are met. Reset events can include: * Date of reverse split * Date of shareholder approval of shares to be issued from warrants * Date on when the warrants receive notice of effectiveness When the reset event occurs, the warrants' exercise price will be reduced to the lowest price the stock has traded recently (subject to a floor price). The number of warrants will be proportionally adjusted by the decrease in the exercise price. Any reset will typically require shareholder approval except in certain cases involving foreign companies or companies with supervoting shares that can automatically pass any shareholder resolutions. For example, if the initial exercise price is $3, and the current price after the reset event is $0.3, then the number of warrants will be increased by $3/$0.3=10x. Thus 10x multiplier combined with the previous 1-3x multiplier can result in as high as 10-30x the initial number of warrants, all of which do not require additional payment for shares. # Timeline of Specific Example on Ticker AEON *Note: All numbers in this example uses post split prices for consistency (1:72 ratio)* https://preview.redd.it/oi4hn4t5mqoe1.png?width=1045&format=png&auto=webp&s=1cbe70fce253d524646e39ab570f62e6c8ed7f72 # Phase 0: Before Offering Normal trading behaviour. May slowly decline if pricing in possible offering with cashless warrants disclosed in a S-1 offering registration. # Phase 1: Offering Announced with Cashless Warrants but Pending Shareholder Approval and/or Reset Jan 6, 2025: Offering announced, causing a drop in stock price as the float instantly doubled along with market negatively reacting to the deal terms. However, the cashless warrants still require shareholder approval so the float is fixed at 1M until proxies are filed and resolutions of the reverse split and warrant issuance is approved. [Specific deal terms](https://www.sec.gov/Archives/edgar/data/1837607/000110465925001515/tm2432042-3_424b5.htm) in this case are: 1. 550K shares plus 550K Series A Warrants and 550K Alternate Cashless Series B Warrants 2. Initial Exercise Price: $45 3. Alternate Cashless Multiplier: Under the alternate cashless exercise option of the Series B Warrants, a holder of the Series B *Warrant* has the right to receive an aggregate number of *shares* equal to the product of (x) the aggregate number of *shares* of *common stock* that would be issuable upon a cashless exercise of the Series B *Warrant* and (y) **three**. 4. Reset Events: 1. Resets to the lowest volume weighted average *price* (“VWAP”) during the period commencing five trading days immediately preceding and the five trading days commencing on the date we effect a **reverse stock** ***split*** in the future with a proportionate adjustment to the number of *shares* underlying the Series A Warrants and Series B Warrants. 2. On the 11th trading day after the ***Warrant*** **Stockholder Approval Date** (the “Reset Date”), the *exercise price* of the Warrants will be reset to a *price* equal to the lower of (i) the *exercise price* then in effect and (ii) the greater of (a) the lowest daily volume weighted average *price* (“VWAP”) during the period commencing on the first trading day after the *Warrant* Stockholder Approval Date and ending following the close of trading on the 10th trading day thereafter (the “Reset Period”) 5. Floor Price: $8.064 We now have the necessary information to compute maximum cashless warrants issuable at the floor price: Total Maximum Shares From Series B = 550,000×3×$45/$8.064 = **9,201,500** This means that once shareholders approve the cashless exercise. A maximum of 9.2M additional shares can hit the market. One characteristic of phase 1 is that it can have several technical bounces if the initial selloff on offering announcement is steep. As the cashless shares are still pending approval, there is no heavy dilution occurring yet besides the initial shares issued in the offering. Jan 23, 2025: AEON files [DEF 14A](https://www.sec.gov/Archives/edgar/data/1837607/000183760725000007/aeon-20250224xdef14a.htm) which calls for a shareholder meeting to occur on Feb 24, 2025 to approve the cashless warrants and a reverse split. Feb 24, 2025: Both the reverse split and cashless warrants approved, triggering the reset clauses that allows 9.2M shares to be issued. Company announces 1:72 reverse split effective Feb 26th which marks the start of Phase 2. # Phase 2: Active Selling of the Cashless Warrants This phase starts when cashless warrants can begin hitting the market and stops when all of them has hit the market. The price drop in this phase is significant due to the fact that 9.2M shares is 9x the existing float. AEON in this case experienced a 95% price drop. One can estimate if the selling has been completed by gauging total trading volume traded since the triggering date. A rough heuristic would be to use the 30% rule which is if the total shares issuable is 30% of the total volume traded. # Phase 3: End of Selling and Start of New Equilibrium Once all 9.2m shares hit the market, a technical bounce may occur. This is due to the fact that the initial selling is indiscriminate and can cause the stock to enter an oversold state. In this case, AEON bounced from $0.42 to $0.8, nearly 100% from the bottom, likely shortly after all 9.2M shares have hit the market. # Example 2: SPGC https://preview.redd.it/d8cxirecmqoe1.png?width=1051&format=png&auto=webp&s=a464b8e57eb4e6337729d1728087567c176f95bd We implore readers to apply the knowledge learned from AEON to work out their own calculations for SPGC to see if they can arrive at the same conclusion as the image above. # Conclusion Alternate cashless warrants trigger distinct price actions throughout their lifecycle. Initially, Phase 0 shows a gradual decline as the market anticipates potential dilution. In Phase 1, the announcement leads to an immediate price drop, tempered by temporary bounces while approval is pending. Phase 2 sees a dramatic sell-off with the issuance shares that can be as high as 10x the prior float, while phase 3 may offer a technical bounce as the market finds a new balance. By understanding the key deal terms and closely following the reset events, one can strategically navigate the phases and find opportunistic areas of profit. Lastly, we end this blog with a non-exhaustive list of tickers and the phases we believe they are currently in. || || |Phase 1|Phase 2|Phase 3| |Cashless warrants announced but still pending approval, registration, and/or reset|Active selling of cashless warrants|Selling finished and cycle complete| |GNLN, PSTV, ZCAR, STSS, RNAZ, PTPI, SUNE, LGMK, HCTI, EFSH, DGLY, FMTO, APDN, AGMH, HEPA, RSLS|SPGC, ICON, NVNI, ACON|AEON, GCTK, REVB, RIME, UOKA, HMR (MGOL)| *Data above relevant as of March 10, 2025.*
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