The market is likely to cheer the issue of warrants as if money has been created out of thin air.... much like the issue of bonus shares. The truth of course is that no matter how you cut the cake, you still have one cake. Hence, more pieces does not mean that the cake size has increased.
These warrants cost 1ct each and has an exercise price of 12cts with a likely 3 year term. With the mother share price at 18.5cts, these warrants will be in the money if the share price holds. These are good instruments if one is bullish on the stock.
A quick look at the counter. At 18.5cts, market capitalisation is $46.67 mil. Half year results ended Sept 2013 shows a revenue of $47 mil compared to $41 mil the year before. Profits of $904,000 compared to $1.88 mil. Cash of $10.6 mil. Loans of $27 mil. This is where I stop looking any further into the company as the company is heavily leveraged with a high PE.
Even if the company does well, there may be 111 mil new warrants being exercised adding to the current 251 mil shares... resulting in a further dilution of its PE. Yes, the issue of warrants puts pressure on the earnings per share when the warrant is in the money. Most investors do not understand this part about company issued warrants.