Shares of Applied Digital Corp (NASDAQ: APLD) fell sharply on Wednesday, plummeting 5.91% after the IT firm filed a prospectus with the SEC related to the resale of warrants by a selling stockholder.

The prospectus covers the resale of up to 2,964,917 warrants, which are immediately exercisable to purchase APLD shares at a strike price of $4.80 per share. It also allows the selling stockholder to resell the same number of warrant shares if exercised.

Warrants are securities that give holders the right to purchase a company's stock at a fixed price within a specific time period. The potential dilution from the resale of these warrants and the issuance of new shares upon exercise could put downward pressure on APLD's stock price, explaining the sharp decline. It's worth noting that Applied Digital will not receive any proceeds from this resale transaction.