Presented by: Subrato Banerjee

Roll No – 1154

SECURITY MARKET Warrants

Security that entitles the holder to buy the underlying stock of the issuing company.

Warrants and options are similar in that the two contractual financial instruments allow the holder special rights to buy securities.

Warrants are frequently attached to bonds or preferred stock as a sweetener, allowing the issuer to pay lower interest rates or dividends.

Introduction

Equity warrants

Covered warrants

Basket warrants

Index warrants

Wedding warrants

Detachable

warrants

Naked warrants

Types of Warrants

By sale to underwriter at a nominal price as apart of there underwriter commission.

By sale of only warrants to the investors.

Warrants are attached to some senior securities as a bonus on that securities.

Issue of Warrants

Cash received on exercise of warrant at the future date.

Cash received on sale of warrants in the beginning if it is provided in the contract.

Consideration for earlier financing supplied to the company as a part of purchase to senior security with which warrant was attached.

CONSIDERATION

By Issuing warrant the company is insured that it will received the fund in future.

It acts as an sweetener for the investor.

The company had no obligation to pay interest or dividend on the warrant therefore the cost of fund for the warrant is zero for the warrant period.

Advantage for company

The warrant market is a gambler market because it is more related with future which is known.

Question should be asked by the investor whether his going to get a good return within the time period during which he is purchasing a warrant.

Work out the likely price and its effect on the price of share in the market because the price of warrant also sometime leads to share price as compare to lagging situation.

Golden Rules

Graphs