Selling short is one way to hedge the warrants. It effectively converts the position into a deep out-of-the money put and lets the investor extract the profit. There is no further upside from share price appreciation, but there is a payoff if the share price plummets.

This strategy is preferable to exercising the warrants and selling the shares. If the share price stays above $2.60, it does not make too much difference which strategy was used, the profit will be almost identical. Shorting the shares will create a slightly higher profit due to the time value of money. However, if the share price drops, shorting would be a much better strategy.

So, I think that you are right Rak that some of the warrant holders may have shorted. Selling the warrants is probably more difficult and will create more transaction costs than shorting.

Another way to hedge the warrants is by writing calls, but it is not a perfect hedge due to the differences in strike prices and expiration dates.