What is one major disadvantage of warrants for the issuer?

One major disadvantage of warrants for the issuer is that new shares may be issued at a significant discount to the share price at conversion. When a warrant is exercised, the holder has the right to purchase shares at a predetermined price, known as the exercise price, which can be considerably lower than the current market price. This issuance of new shares can dilute the existing shareholders' equity, impacting the overall value of their shares.

As new shares enter the market at a lower price during the conversion of warrants, it can lead to a potential decrease in the market price of the existing shares due to the increased supply. This dilution effect is often a significant concern for companies, especially if the warrants are exercised when the market is favorable, leading to a substantial increase in the number of outstanding shares.

The other options do not capture the primary concern of issuers with regard to warrants. While issuing shares at a premium could be potentially beneficial, cancelling dividends is not a direct effect of warrant issuance, and reduced liquidity pertains more to the market dynamics rather than the fundamental disadvantage to the issuer involved in the conversion process of warrants.