Good question! and good reminder that I need to explain these things often, as they are far from easy to figure out.
When companies finance – raise money by issuing new shares – the shares issued are NOT free to trade for the first four months. (There are a few kinds of financings where this is not the case, ie where shares are free too trade immediately, but those are the exception rather than the rule in the junior space. The two main ones are direct listing IPOs and prospectus offerings, which is a kind of financing used by larger companies.)
Whatever a share price does in those four months, the investors who bought in the financing have to hold their shares. If the share price appreciates notably, you can understand that these investors are then keen to sell into the strength when they are allowed to do so.
Sophisticated investors, which here means investors with margin trading accounts, can start to sell their financing shares as much as two weeks before the free trade date. regular investors can sell on the free trade date.
Companies try to place financing shares with supportive investors but that’s an imperfect art, because even supportive shareholders will sell some when a stock has multiplied!! Such was the case with Empress, the financing for which was at $0.20 and came free trading last week.
Free trade date selling pressure is also more when the financing included a warrant component, because then investors who remain bullish on the story can sell some of their holdings into strength while remaining comfortable that they retain exposure to the upside through their warrants.
It’s one of management’s jobs to try to manage the impact of a free trade date. That can mean talking to investors about how the free trade date period will likely represent an entry opportunity; it can mean lining up news announcements for that time frame; it can mean reminding shareholders of news that it still pending, and so on.