Alligator Bioscience’s Series TO 12 Warrants: Pricing Mechanism and Strategic Implications

Alligator Bioscience AB (NASDAQ: ALLOFF), a biotech firm focused on immuno-oncology therapies, has finalized the terms for its Series TO 12 warrants, offering investors clarity on the exercise price and timeline for these instruments. The warrants, tied to a recent reverse share split, could significantly impact the company’s capital structure and shareholder dilution. Below is an analysis of the key details and their implications.

The Exercise Price Mechanism

The exercise price for each Series TO 12 warrant is determined as 70% of the volume-weighted average price (VWAP) of Alligator’s ordinary shares on Nasdaq Stockholm between April 11–28, 2025. This price is subject to strict boundaries:- Lower Limit: The higher of the share’s quota value (SEK 0.80 post-reverse split) or SEK 0.01, effectively capping the minimum at SEK 0.80.- Upper Limit: SEK 12.50, which is 125% of the original subscription price in the 2024 Rights Issue, adjusted for the reverse split.

This pricing structure ensures the warrants remain viable even if the stock price fluctuates sharply during the VWAP calculation period. Investors will monitor the stock’s performance closely during April to estimate their potential gains or losses.

Reverse Share Split Impact

The reverse split, which consolidated 1,000 shares into 1, drastically altered the warrants’ terms. Key adjustments include:- Each Series TO 12 warrant now entitles holders to 0.001 ordinary shares, requiring 1,000 warrants to subscribe for 1 new share.- The quota value per share increased from SEK 0.0008 to SEK 0.80, aligning the warrants’ floor with the new share structure.

Exercise Window and Dilution Risks

The exercise period remains May 5–19, 2025, unchanged by the reverse split. If all warrants are exercised, the company could raise up to SEK 191 million (pre-issue costs), boosting funds for its lead drug candidate, mitazalimab. However, this would also dilute existing shareholders by ~98.9% if both the Rights Issue and warrants are fully subscribed. This extreme dilution highlights the precarious balance between securing capital and maintaining ownership value.

Strategic Considerations for Investors

1. Warrant Holders: The 70% VWAP discount creates an incentive to exercise warrants if the stock price rises post-split. However, the SEK 12.50 ceiling limits upside potential.
2. Shareholders: Non-participating shareholders face significant dilution, making this a pivotal moment for maintaining stake in the company.
3. Company Funding: The proceeds from warrant exercises could be critical for advancing mitazalimab’s clinical trials, which the company has prioritized.

Conclusion: A High-Risk, High-Reward Crossroads

Alligator Bioscience’s Series TO 12 warrants present a complex trade-off. On one hand, the SEK 191 million potential infusion could accelerate drug development and stabilize liquidity. On the other, the 98.9% dilution risk underscores the threat to existing shareholders’ value. Investors must weigh the likelihood of the stock outperforming the SEK 12.50 ceiling against the benefits of capital injection.

Historically, Alligator’s share price has been volatile, with its Nasdaq listing often reflecting clinical trial milestones. For instance, in late 2023, shares surged 150% following positive Phase 1 data for mitazalimab. If the drug’s Phase 2 results (expected in H2 2025) meet or exceed expectations, the stock could rally, making warrant exercises attractive. Conversely, any setback could render the warrants nearly worthless below the SEK 0.80 floor.

In summary, the Series TO 12 warrants are a dual-edged sword. While they offer a lifeline for the company, their execution hinges on Alligator’s ability to deliver on its scientific promises—and investors’ appetite for high-risk biotech plays. The coming months will be critical for determining whether this capital structure shift becomes a catalyst for growth or a cautionary tale of over-leverage.