Skydance Corp. (NYSE: SKYD) shares rebounded a bit Wednesday after the company explained how its warrant distribution affected the stock's reference price. The update followed a sharp decline earlier in the session.

Shares had been down as much as 25% before Skydance's announcement outlined a much smaller adjustment tied to the warrants.

What Happened?

Skydance distributed approximately 471 million warrants Tuesday to eligible shareholders who owned Class B stock as of Oct. 5. Investors received one warrant for each eligible share.

The distribution followed Skydance's Oct. 6 acquisition of Warner Bros. Discovery, and the warrants began trading Tuesday under SKYD.WS.

Skydance said the New York Stock Exchange adjusted the common stock's reference price by 19 cents, lowering it from approximately $9.27 to $9.07. The exchange based that adjustment on the warrants' $2.20 closing price Tuesday.

However, the calculation also accounted for the fact that only approximately 9% of outstanding shares qualified for the distribution. This means the exchange reduced the stock's reference price by about 19 cents, rather than subtracting the full $2.20 warrant value from every share.

Where Did the Value Go?

Skydance's example showed the common stock's market value falling from approximately $46.6 billion to $45.6 billion after the warrants separated. The warrants added approximately $1 billion in value.

Combining the shares and warrants left total equity value unchanged at approximately $46.6 billion in the company's illustration. The takeaway: Some value shifted into a separately traded security. The distribution itself did not erase that value.

Still, the company's illustration was not a promise about where either security would trade. Both the stock and warrants can rise or fall with market demand.

The roughly 19-cent adjustment also did not account for the stock's much larger decline earlier Wednesday. Investors should distinguish that technical change from the selling pressure.

SKYD Stock Price Action: Skydance stock ended Wednesday's session down 23.84% at $7.06, with shares edging slightly lower in after-hours trading.

The stock closed $2.21 below Tuesday's unadjusted closing price of $9.27, a drop far larger than the roughly 19-cent warrant-related adjustment. Despite an intraday rebound following the company's clarification, shares finished the session with steep losses.