Jeff, I agree with Baba, it is never advantageous to exercise a non-dividend paying call option early. Even if they are deep in the money with no chance of expiring out of the money, you are saving the interest on the strike price for the period up to the option expiration. Time value never goes all the way to zero.

You asked :“Due to this I feel the dismal liquidity of the warrants will only get worse as more are converted. Thoughts?”

I don’t think that others will exercise early for the above reasons. That being said, liquidity may drop off if they are deep in the money because they no longer act like options but start resembling a stock position; the price of the warrant will be almost as much as the price of the stock and the chance of ending out of the money is almost zero.

One additional point to consider is taxes. The long-term tax rate clock only starts ticking when you exercise an option. If you exercise an option, you have to hold the stock for one year before the gains from both the option and the stock are treated as long term. If you sell the warrant after holding for one year, that gain would qualify as a long term gain.