Understanding Warrants (help)

I was reading the Patriot National (PN) Prospectus (form 424B3) released 2/8/2016 and they mention the following about their warrants that may be exercised this year.

As described in “Selling Stockholders,” the selling stockholders hold warrants to purchase shares of our common stock. The New Series A
Warrants are exercisable to purchase up to an aggregate of 3,250,000 shares of our common stock at an exercise price of the lesser of (i) $10.00 and (ii) 85% of the market price of the shares (as defined in the New Warrants), from July 1, 2016 to December 31, 2020, subject to adjustments and limitations pursuant to their terms. The New Series B Warrants are exercisable to purchase a number of shares that the holder could purchase at a price equal to 90% of the lowest 10-day volume-weighted average stock price during the period commencing on February 1, 2016 through and including the Adjustment Time less the number of shares such holder purchased, subject to adjustments and limitations pursuant to their terms, at an exercise price of $0.01 from December 16, 2015 to December 31, 2020.

Doesn’t the New Series A Warrants make the holders of those warrants to want the stock price to be as low as possible on July 1, 2016?! Is anyone out there, who is savvy about warrants, able to answer if the above description makes the big players want the price to go lower? If the price was well above $10 a share there wouldn’t be this pressure.

The Prospectus also warns Downward pressure on the market price of our common stock that likely will result from sales of our common stock issued in connection with an exercise of warrants could encourage short sales of our common stock by market participants.

Don’t you read this as trouble for the stock thru at least July?

2 Likes