WF Holding Limited (NASDAQ:WFF) shares plunged and trading was halted after the company announced an $18 million stock offering with warrant terms that could sharply increase its share count.
The company agreed to sell 12 million ordinary shares, or pre-funded warrants instead, to institutional investors for $1.50 each. Those investors will also receive 12 million warrants that could allow them to acquire substantially more shares.
- WFF stock is crashing. See the chart and price action here.
Why the Warrants Matter
The warrants have a $1.50 exercise price and can be exercised immediately after they are issued. They expire after one year.
The bigger concern for existing shareholders is a cashless exercise option. Each warrant allows its holder to receive up to nine ordinary shares without paying additional cash.
If all 12 million warrants are exercised for the maximum nine shares, the company could issue another 108 million shares. Including the 12 million shares from the initial offering, the deal could potentially add 120 million shares in total.
Those shares would not necessarily enter the market immediately. The final number will depend on whether and how investors exercise their warrants.
Dilution Takes Focus
Issuing more shares spreads ownership across a larger total. Existing shareholders would own a smaller percentage of the company unless they bought additional shares.
The cashless option also means WF Holding would not receive additional cash when investors exercise warrants that way. The potential increase in shares therefore goes well beyond the stock being sold to raise the initial $18 million.
From $50 to Under $1
The offering follows a violent round trip. The stock closed at $2.05 last Thursday. On Friday, more than 146 million shares changed hands and it closed at $12.29.
By Monday, WFF stock hit $50.60 intraday, more than 2,300% above the Oct. 8 close. Shares closed Tuesday at $2.12, down nearly 88% from Monday’s $17.28 close.
Wednesday’s session was choppy with the stock as high as $3.43 before the offering was announced.
WFF Stock Price Activity: WF Holding shares are trading lower by 84.43% at $0.33 at the time of publication on Wednesday, according to Benzinga Pro data.
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