Shares of Skydance Corp. fell sharply on Wednesday after the newly formed media company distributed nearly 471 million stock warrants to its shareholders, with the drop coming one day after the distribution.

The stock fell as much as 26% during Wednesday trading, changing hands at $6.68 per share as of 11:35 a.m. ET. It later pared some of those losses, closing down 22.2% at $7.06 a share.

The company distributed roughly 470.7 million warrants on Oct. 13 following its acquisition of Warner Bros. Discovery, according to a filing with the U.S. Securities and Exchange Commission (SEC). Warrants give investors the right, but not the obligation, to buy shares at a set price before they expire. Because each exercised warrant is settled with a newly issued Class B share, the distribution also expands the potential number of Skydance shares outstanding.

Under the distribution terms, eligible shareholders received one warrant for each share of Skydance Class B common stock they held as of the Oct. 5 record date, the cutoff used to determine eligibility. Each warrant allows its holder to purchase one Skydance Class B share for $12. That exercise price is above Wednesday's closing price of $7.06, meaning holders would currently pay more by exercising a warrant than by buying Class B shares on the open market. If all of the warrants are exercised, Skydance could raise about $5.7 billion, according to the company. The warrants are set to expire in October 2036, although they could expire earlier under certain conditions.

The warrant distribution followed Skydance's completion of its $110 billion takeover Warner Bros. Discovery. The deal placed brands including CBS, CNN, Paramount+ and HBO Max under one roof, according to Reuters. The combined company began trading on the New York Stock Exchange under the ticker "SKYD" following the closing of the transaction.

Wells Fargo analysts said the warrant distribution marked the "final step" in closing the Warner Bros. Discovery transaction, according to Variety.

Chief Executive David Ellison has said the merger would help Skydance better compete with streaming and technology giants including Netflix and Amazon, Reuters reported. As part of that strategy, Skydance plans to combine HBO Max and Paramount+ into a single streaming service while pursuing about $6 billion in planned savings.

The combined company is expected to carry roughly $80 billion in debt, according to Reuters.

FOX Business reached out to Skydance for comment. Reuters contributed to this report.