Why did 400,000 stock options exercised in Q3 2025 result in only 23,155 common shares issued?

The discrepancy between 400,000 stock options exercised and only 23,155 common shares issued by Rare Element Resources Ltd. (US:REEMF) in Q3 2025 likely points to a "net settlement" or "cashless exercise" mechanism. This is a common practice, especially for employee stock options, where the option holder does not pay cash to exercise the options. Instead, the company withholds a portion of the shares that would have been issued to cover the exercise price and any applicable taxes.

Here's how it generally works:

• Exercise Price Coverage: The number of shares equivalent to the aggregate exercise price of the options is withheld by the company. For example, if 400,000 options with an exercise price of $X were exercised, shares worth 400,000 * $X would be retained by the company to satisfy the payment.
• Tax Withholding: Additional shares are often withheld to cover the option holder's statutory tax obligations arising from the exercise.
• Net Issuance: Only the remaining "net" shares, after deducting those used for the exercise price and taxes, are actually issued to the option holder.

Given the significant difference (400,000 options resulting in 23,155 shares), it indicates that a large portion of the shares were withheld to cover the exercise price and taxes. This method allows option holders to realize the value of their options without needing to provide upfront cash, while also managing the dilutive effect by reducing the immediate influx of new shares into the market compared to a full cash exercise.

Calculate the implied average exercise price and tax withholding rate based on the 400,000 options and 23,155 shares issued to estimate the financial impact.