LVTX

Could the transaction trigger any anti‑dilution provisions or warrant adjustments for existing shareholders?

Created August 06, 2025 at 07:49 PM

Short answer:

Yes – the sale could trigger anti‑dilution mechanisms and warrant‑adjustment provisions for any existing LAVA Therapeutics securities that contain such clauses (e.g., outstanding warrants, convertible preferred shares, or other contingent‑value rights). Whether it actually does will depend on the specific language in those securities’ governing documents, but the structure of the deal (cash per share + a contingent‑value right that is non‑transferable) creates several classic “dilution‑type” events that most anti‑dilution formulas are designed to address.

1. Why the transaction is a potential dilution event

Element of the deal	Why it can be seen as dilutive
Cash consideration of $1.16 + up‑to $0.08 per share	The price is set by the transaction, not by the open‑market value of LVTX at the time of closing. If the market price is higher, shareholders receive less value per share than they could have obtained on the market, which is the classic trigger for anti‑dilution protection.
Non‑transferable Contingent Value Right (CVR)	A CVR is a new class of security that is issued to each shareholder in addition to the cash. Even though it is non‑transferable, it is still a “right to receive future proceeds” and therefore changes the capital‑structure calculus. Many anti‑dilution clauses treat CVRs the same way as warrants or convertible securities.
75 % of net proceeds from two partnered assets	The CVR’s value is tied to future asset‑sale proceeds, which are uncertain. If the proceeds end up being lower than the cash component, the overall effective price per share could fall well below the pre‑announcement market price, again activating anti‑dilution protections.

Because the deal introduces new securities (the CVRs) and locks in a fixed cash price, it is a textbook scenario that triggers anti‑dilution formulas in most corporate charters.

2. Typical anti‑dilution mechanisms that could be activated

Mechanism	How it works	Likely impact in this transaction
Full‑ratchet anti‑dilution	The conversion or exercise price of existing convertible securities is reset to the lowest price at which new shares are issued (here, $1.16 + $0.08).	Existing convertible preferred or warrants would be repriced to $1.24 (or possibly $1.16 if the $0.08 is considered a “potential” amount).
Weighted‑average anti‑dilution	Adjusts the price based on the relative size of the new issuance versus the existing pool. The formula uses the number of shares issued and the price paid.	The cash component and the CVR would be factored into the “new‑share” count, lowering the exercise price of outstanding warrants proportionally.
Pro‑ rata rights / anti‑dilution for warrants	Some warrants contain a “price‑step‑down” clause that automatically reduces the strike price if the company issues shares at a lower price.	If LVTX has outstanding warrants with a strike price above $1.24, the strike would be reduced, making the warrants more valuable to holders.
Adjustment of convertible preferred or debt	Convertible securities often have a “conversion price” that is adjusted downward when a “dilutive” financing occurs.	Existing convertible preferred could be converted into a larger number of LVTX shares, preserving the economic value of the original investment.

3. What the Contingent Value Right (CVR) means for anti‑dilution

CVR classification: In most jurisdictions, a CVR is treated as a derivative security that is separate from the underlying common stock. Even though the CVR is “non‑transferable,” it still represents a right to receive additional consideration. Many corporate governance documents explicitly list CVRs alongside warrants in the anti‑dilution clause.
Effect on existing securities: Because the CVR is issued per share (i.e., one CVR for each LVTX share held), the total “share count” that anti‑dilution formulas must consider is effectively increased. For a weighted‑average anti‑dilution calculation, the denominator (total shares outstanding after the transaction) will be larger, which generally tightens the price adjustment for existing warrants.
Potential for “double‑dilution”: Existing shareholders could see two dilution vectors: (1) the cash price being lower than market, and (2) the CVR representing a claim on future proceeds that may be less than the cash component. Anti‑dilution provisions are designed to protect against exactly this type of “double‑dilution” scenario.

4. Practical implications for LAVA shareholders

Situation	What a typical anti‑dilution clause would do	Result for shareholders
Outstanding warrants with strike > $1.24	Full‑ratchet or weighted‑average reset to the lower price.	Warrants become cheaper to exercise, preserving upside.
Convertible preferred stock	Conversion price is reduced, increasing the number of LVTX shares received on conversion.	Preferred holders keep the same economic value despite the lower cash price.
Other CVRs or performance‑linked securities	May be cross‑referenced in the anti‑dilution language; the new CVR could be treated as “new shares” for the purpose of adjusting existing rights.	Existing CVR holders could see their rights re‑priced upward, but the new CVR is non‑transferable, limiting marketability.
No anti‑dilution language in existing securities	No automatic adjustment; shareholders simply receive the cash and CVR as defined.	Potential loss of value if the transaction price is below market, unless shareholders can sell the CVR on a secondary market (unlikely given non‑transferability).

5. How the Halper Sadeh LLC investigation may intersect with anti‑dilution concerns

Fairness to shareholders: One of the standard “fair‑to‑shareholders” tests in an M&A review is whether the consideration is dilutive relative to the pre‑announcement market price and whether existing securities are adequately protected by anti‑dilution clauses.
Potential “material adverse effect” claim: If the anti‑dilution provisions are weak or absent, Halper Sadeh LLC could argue that the transaction unfairly disadvantages holders of warrants, convertible preferred, or other rights, possibly leading to a re‑negotiation of the purchase price or the inclusion of additional protective terms.
Disclosure of CVR terms: The investigation will likely scrutinize the valuation methodology for the CVR (75 % of net proceeds from two partnered assets). If the methodology is overly optimistic, the effective price per share could be materially lower than the cash component, again raising dilution concerns.

6. Bottom‑line take‑aways for LAVA shareholders

Check the governing documents of any outstanding warrants, convertible preferred, or other derivative securities. Look for “full‑ratchet,” “broad‑based weighted‑average,” or “narrow‑based weighted‑average” anti‑dilution language.
If you hold warrants with a strike price above roughly $1.24 (cash $1.16 + $0.08), you can reasonably expect the strike to be re‑priced downward under most anti‑dilution clauses, improving the value of those warrants.
If you hold convertible securities, the conversion price will likely be re‑set to reflect the $1.24 effective price, preserving the economic value of your investment.
If you do not hold any such securities, the transaction will simply deliver cash and a non‑transferable CVR. The CVR’s value is uncertain and tied to future asset sales, so the overall consideration could still be dilutive relative to the market price at the time of the deal.
The ongoing investigation suggests that there may be shareholder‑level concerns about whether the anti‑dilution protections (or lack thereof) are sufficient. Keep an eye on any press releases or filings from Halper Sadeh LLC, as they may prompt the board to amend the transaction terms (e.g., by increasing the cash component, adding a “floor price” for the CVR, or explicitly adjusting existing securities).

Final Verdict

Yes, the LVTX‑XOMA Royalty transaction has the hallmarks of a dilutive event that can, and under most standard corporate charters will, trigger anti‑dilution adjustments for existing warrants, convertible securities, or any other rights that contain anti‑dilution language. The magnitude and method of those adjustments will be dictated by the specific anti‑dilution formulas (full‑ratchet vs. weighted‑average) embedded in those securities’ governing documents. The presence of a non‑transferable CVR further complicates the capital‑structure picture and is likely to be treated as a “new share” for the purpose of any anti‑dilution calculations.

Shareholders should therefore review the terms of any outstanding derivative securities they own and monitor the outcome of Halper Sadeh LLC’s investigation, as it may lead to additional protective measures or a renegotiation of the deal price.