There is another case with the warrants, which is if instead of exercising them, you hold onto them and sell when the share price is much higher than the strike price, and then purchase shares with the proceeds.

For someone like me who does not have the cash to exercise the warrants, if I did choose to exercise them I would want to wait until the share price is higher to get the most leverage. However doing that would incur substantial immediate taxable income at a very high tax rate. I would also need to exercise some warrants, sell shares to finance exercising the rest.

Instead, selling all the warrants would only incur long term capital gains. At least for me this seems the better deal, if I wait until the share price is $20 I figure the warrants should be at $16 at least.

Anyway that changes the equation some with that method.

If one has the cash to exercise the warrants, which I don’t, then it is a different story and probably makes sense to exercise them as soon as the share price = 3.44 + price paid per warrant, to avoid large immediate taxable income.

Thanks both Red and Matzaball for the great posts, and also to Matz for the post about NADA 2020 and NCompassTrac, etc.