Warrants and convertibles

    0
    134

    This post is also available in: German Russian

    Convertibles and warrants are securities offered by companies to attract investors and raise finance.

    Convertibles

    Convertibles are long-term securities which can be changed into another type of security, such as common stock. Convertibles include bonds and preferred shares, but most commonly take the form of bondsBonds are debt instruments, which means they are a way of ... More.

    Convertibles are attractive to investors who are looking for an investment with greater growth potential than that offered by a traditional bond. By purchasing a convertible bond, the investor can still receive returns as if it were a traditional bond, but has the additional option of converting that bond into shares if the share priceincreases enough to make it worthwhile.

    Warrants

    Warrants are also long-term securities but are generally shorter-term than convertibles. They grant investorsWhat are value stocks? A value company is a company that app... More the right to purchase sharesWhat are value stocks? A value company is a company that app... More at a fixed priceWhat are value stocks? A value company is a company that app... More (known as the “exercise price”) for a predetermined amount of time, often several years.

    Warrants are often tied to bonds or preferred stock, but can also be issued independently.

    The exercise priceWhat is price? The price is the measure of the value of goo... More is usually higher than the price at which the shares for the company are currently trading, but if those shares then increase in value, the investorAn investor is someone who spends capital with the expecta... More will still be able to purchase at the exercise price.

    Warrants are more valuable in volatile markets when chances of the price swinging above the exercise price are good. They become less valuable as the warrant expiration date approaches because the chances of a favourable price swing are greatly reduced.