Warrants

What this video covers

• Why warrants are issued as sweeteners on corporate bonds and preferred stock, and how they compensate investors for below-market yields
• The exact opposite pricing dynamic between warrants (exercise price above market, out of the money) and rights (exercise price below market, in the money)
• The 2-to-5-year or perpetual time horizon for warrants versus the 30-to-90-day life of rights
• Why warrant holders have zero voting rights and receive zero dividends until exercise, and why they are not stockholders
• How to calculate intrinsic value (market price minus exercise price, floored at zero) and why time value premium exists even when intrinsic value is zero
• Why warrant exercise is dilutive (creates new shares), requiring stockholder approval at issuance
• How anti-dilution provisions adjust exercise price and shares purchasable after stock splits, stock dividends, reverse splits, or below-market issuances