How will the issuance of Class A ordinary shares and warrants affect dilution and earnings per share?

The private‐placement adds three distinct “layers’’ of potential equity:

• 1.36 million Class A ordinary shares are issued outright at the closing.
  
• 22.99 million prefunded warrants are already funded – they represent a cash contribution now, but they will convert into ordinary shares when the underlying warrants are exercised, expanding the share count immediately.
  
• Two separate warrant series (A and B) each callable for up to 24.35 million shares. If both are fully exercised, another 48.7 million shares can be added later.

Even if the warrants are never exercised, the 1.36 M + 22.99 M ≈ 24.3 M new shares will dilute the existing pool. If the A + B warrants are also exercised, total potential dilution jumps to roughly 73 million shares – a ten‑fold increase over the current issuance. Because the proceeds total only $17.8 M, the incremental earnings generated by the cash must spread over a much larger capital base, so earnings per share (EPS) will decline in the near term. The dilution outweighs any immediate earnings benefit unless management can deploy the $17.8 M into higher‑return projects that lift net income fast enough to offset the larger share count.

Trading implication: Expect short‑run price pressure as the market prices in the diluted EPS and the expanded share base. The stock may trade at a modest discount to peers until the newly‑raised capital starts delivering incremental profit growth. For technical traders, the issuance often triggers a “breakdown” on the daily chart; a bounce back will likely need confirmation from improving fundamentals (e.g., higher margins or higher revenue from new contracts). In the meantime, a cautious, short‑biased stance or a wait‑and‑see approach until the capital is put to work is prudent.