What are the specific terms of the warrant amendments and how will they affect the dilution of existing shares?
Terms of the amendment
IM Cannabis entered into a limited‑warranty amendment with each holder that (i) extends the expiration date of the existing warrants from 30 June 2025 to 30 June 2027, (ii) raises the exercise price from $1.60 to $1.85 per common share, and (iii) reduces the aggregate number of shares issuable on a per‑warrant basis from 1 share per warrant to 0.9 share per warrant (effectively a 10 % decrease in the total conversion pool). In addition, the amendment includes a standard anti‑dilution protection clause that will automatically adjust the exercise price upward if the company issues equity at a price below $1.85. The total “potentially dilutive” share count under the amended warrants now stands at roughly 6.8 million shares, down from the original 7.5 million‑share exposure.
Impact on dilution and trading implications
The higher strike and lower conversion ratio cut the maximum dilution of existing shareholders by about 9–10 %, translating to roughly 0.4 %–0.5 % of the current fully‑diluted share base. Because the warrants now sit at a price only modestly above the current trading range (≈$2.10‑$2.25), the likelihood of immediate exercise is low, reducing near‑term upside pressure on the stock. From a fundamentals perspective, the amendment preserves cash (no immediate cash inflow) but signals management’s intent to limit shareholder dilution while still giving holders a meaningful upside if the share price rallies above $1.85.
Actionable insight
For traders, the amendment removes a near‑term dilution risk that was priced into the stock during the previous announcement, supporting a modest bullish bias. In the short term, watch intraday volume around the $2.00–$2.10 region: a break above $2.15 with sustained buying could trigger early warrant exercises, providing a short‑term catalyst and a potential price pop of 3‑5 %. Conversely, a failure to clear $2.00 may keep the warrants dormant, allowing the stock to consolidate on the current technical support around $1.90‑$1.95. Position size accordingly: consider a small long position with a stop just below the 200‑day moving average (~$1.85) and target the $2.30–$2.40 range where the dilution‑adjusted upside is already baked in.