Warrants

What this video covers

• Why warrants are issued by the corporation, not the Options Clearing Corporation (OCC), and what that means for share creation and dilution
• How warrants function as sweeteners attached to bond or preferred stock offerings, and why they cannot be purchased standalone from the issuer
• The complete chronological life cycle of a warrant, from attachment through detachment and exercise, including when the warrant becomes valuable
• Why warrant exercise prices are set above current market price at issuance, and how this differs from rights which price below market
• The duration distinction: warrants run 2-5 years (some perpetual) versus rights at 30-45 days, and why the exam loves to test this timeline
• How both warrants and rights create new, dilutive shares when exercised, unlike standard exchange-traded options where existing shares merely change hands
• The targeted recipient difference: warrants go to anyone buying the attached security, while rights are offered exclusively to existing shareholders