Rights, Warrants, and ADRs: Rapid Fire

What this video covers

• Why preemptive rights are short-term (30-90 days), priced below market, and issued to existing shareholders to prevent dilution
• How warrants function as long-term sweeteners (2-5+ years, sometimes perpetual) attached to bonds or preferred stock, with exercise prices set above market at issuance
• The three choices rights holders face: exercise, sell on the secondary market, or let expire worthless, and how a standby underwriter guarantees the issuer's raise
• Why neither rights nor warrants confer voting rights or dividends until exercised, and why both create new shares upon exercise
• How ADRs wrap foreign equity into U.S. dollar trading, the three levels of ADRs, and why only Level 3 ADRs can raise new capital through a U.S. public offering
• The dividend flow for ADRs: declared in foreign currency, converted to U.S. dollars by the depositary bank, with foreign tax credits available for withheld taxes
• Why ADRs retain currency risk despite trading in U.S. dollars, and how to spot the exam's most common trap on this distinction