The arithmetic behind the overhang
What outstanding warrants mean for your shares
Warrants are disclosed. What they will do to a share count usually is not calculated anywhere a retail holder will see it. Enter four figures from any company's filings and the arithmetic is done below. The figures are prefilled with Theriva Biologics as an example; replace them with any issuer's.
So the lookup can be counted
As it appears on the filing
Cover page of the latest 10-Q or 10-K
Equity or warrant footnote
Warrant footnote, or the 8-K announcing them
Any quote source
| Figure | Value |
|---|---|
| Shares outstanding today | 45,892,668 |
| Shares after full exercise | 62,077,228 |
| Cash to the company if exercised | $8,739,662 |
| Market value of shares today | $10,734,295 |
| Value per share after dilution only | $0.3138 |
| Change in value per share | +34.2% |
Illustrative selling-pressure scenarios
These are not forecasts. They demonstrate how one assumed price-impact formula behaves under selected assumptions. They do not predict any price, and they do not establish that warrants will be exercised, that resulting shares will be sold, or that any person will take a short position.
| Starting point — value after dilution only | $0.3138 |
| Result under the assumed impact | $0.1559 |
Formula: Pfinal = Pdilution × exp[ −λ(Q/L) ], where Q is net selling pressure and L is a liquidity benchmark. The impact value is an assumption the reader sets. It is not derived from any identified trades.
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The formula
Use it on any company
Four figures off a 10-Q produce every number above. Copy the formulas into a spreadsheet if you would rather work there.
How it is calculated
The arithmetic, shown
Nothing here is proprietary. Every step is arithmetic on figures the company discloses.
Distance to strike
( exercise price ÷ current price ) − 1. A warrant is normally exercised only when the market price exceeds the exercise price, because otherwise the holder can buy the same shares more cheaply in the open market. Where a holder exercises below that level, the reason is usually stated in the agreement — most often the receipt of additional warrants.
Dilution
Warrant shares ÷ ( shares outstanding + warrant shares ). This is the proportion of the enlarged company that the warrant shares represent. Overhang is the same numerator measured against today's count, which is the larger figure and the one that shows how much the count can grow.
Value per share after dilution
( shares × price + warrants × exercise price ) ÷ ( shares + warrants ). This assumes the company keeps all cash proceeds and that nothing else about the business changes. It isolates the arithmetic effect of the new shares and the cash they bring in. It is not a valuation.
What is missing from this calculation
It assumes every warrant is exercised for cash. Many warrants permit cashless exercise, in which case the company receives nothing and fewer shares are issued. It ignores blockers, which cap how much any single holder may exercise at one time. It ignores the business itself. And it says nothing about what any holder will do.
Where to find the four numbers
- Shares outstanding. Cover page of the most recent Form 10-Q or 10-K, upper right, stated as of a date within the last few weeks.
- Warrants outstanding and exercise price. The warrant footnote in the same report, usually titled "Stock Warrants," which carries a table of warrants granted, exercised, and outstanding with the weighted average exercise price.
- Current price. Any quote source.
- All filings are free at sec.gov/edgar/search.