How will the dilution from issuing up to 9.5 million shares and 19 million warrants affect EPS and valuation metrics?

The offering will add 9.52 million common shares to the capital base and, if all warrants are exercised, a further 19.04 million shares – a fully‑diluted increase of roughly 28.6 million shares. Assuming Nova LifeStyle’s current share count is about 30 million (the last SEC filing listed ~30 M outstanding), the transaction would push the fully‑diluted count to ≈ 58.6 million shares, a ≈ 95 % rise in the share pool.

Because earnings are spread over a larger denominator, basic EPS will be cut roughly in half (e.g., a $10 M net income would fall from $0.33 per share to ≈$0.17 per share). The same dilution feeds through to all valuation multiples: the price‑to‑earnings (P/E) ratio will double for any given market price, and EV/EBITDA will rise proportionally unless the cash infusion materially lifts earnings or reduces debt. The cash raised ($8.71 M now, plus a potential $20.9 M if every warrant is exercised at $1.098) will increase the numerator of enterprise value, partially offsetting the multiple expansion, but the net effect will still be a lower EPS‑based valuation until the additional capital can be deployed into revenue‑generating projects that lift net income.

Trading implications:

* Short‑term: Expect immediate downward pressure on NVFY as the market prices in the near‑term EPS dilution and the large share supply. Look for a break below the current support around $0.85–$0.90 as a bearish signal.

* Mid‑term: Monitor the warrant‑exercise window (5‑year life, but many investors will act well before expiry if the stock trades above the $1.098 strike). If the price stays above $1.10, the warrants will likely be exercised, adding further dilution but also ~ $21 M of cash that could fund growth initiatives—potentially a catalyst for a rebound.

* Risk‑adjusted play: A cautious approach would be to sell into strength now, set a profit target near $1.05 (the warrant‑exercise price) and consider re‑entering only after the company demonstrates that the new capital is being deployed to lift top‑line growth and restore EPS trajectory.