Challenging market conditions have all but sealed the IPO window shut. Small issuers are finding a way to squeeze through: by offering warrants.
Over the last month, a rising number of small deals have opted to offer warrants in their IPOs, either at the time of the initial filing or in a later amendment. In January, eight issuers filed for IPOs with warrants, and another six added warrants to their offerings in amendments.
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In the context of an IPO, warrants give investors the right to purchase a new issuer’s stock at a specific price within a set time frame. That price is usually equal to or slightly greater than the offer price, and the time frame is often within five years after the IPO. Warrants allow new issuers to both sweeten the pot for investors, and provide an additional source of capital for themselves.
While offering warrants may help small deals get done in challenging conditions, it does not provide immunity from poor trading. From 2021 to date, issuers that have gone public after adding warrants are mostly underwater, averaging a -54% return from IPO.
Recent filers that have opted to offer warrants are all micro-caps and span a variety of industries. The group includes both companies filing for fresh listings, as well as those hoping to uplist from the OTC. Non-listed filers feature ramen restaurant chain Yoshiharu Global, Canadian psychotropics company Lucy Scientific Discovery, aquaculture company The tru Shrimp Companies, short-term rental provider CorpHousing Group, and agtech developer Opti-Harvest.
|Small IPO Filers Planning to Offer Warrants|
|CorpHousing Group (CHG)||$30M||Real Estate||Maxim|
|Provides short-term rentals for travelers in major US cities.|
|Yoshiharu Global (YOSH)||$23M||Consumer Discretionary||EF Hutton|
|Operates six ramen restaurants across Southern California.|
|Lucy Scientific Discovery (LSDI)||$20M||Healthcare||EF Hutton|
|Early-stage psychotropics contract manufacturing company.|
|The tru Shrimp Companies (BTRU)||$17M||Consumer Staples||Lake Street|
|Early-stage aquaculture company focused on seafood and biopolymer production.|
|Opti-Harvest (OPHV)||$17M||Industrials||EF Hutton|
|Developing agriculture and precision farming technology.|
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IPOs with warrants are excluded from Renaissance Capital’s stats and may not have profiles.