What is warrant overhang?

Warrant overhang describes the suppressing effect on a share price created by a large block of outstanding warrants (and similar convertible instruments). As the stock rises toward and past the warrants' exercise prices, holders can exercise — creating new shares and potential sellers — which caps rallies and is a source of future dilution.

It matters most for junior explorers, which finance themselves repeatedly through units (a share plus a warrant). After several raises, the warrant book can equal a large fraction of shares outstanding. Investors track: how many warrants are outstanding, their exercise prices relative to the current price (in-the-money warrants are the immediate overhang), and their expiry dates.

A near-term cluster of in-the-money warrants is a headwind; warrants far out of the money or long-dated matter less. Strikepoint News's warrant overhang tool reconstructs a company's warrant book from filings and flags how much potential dilution sits above the current price.