What are Share Warrants? How Risky?

What can you tell me about Warrants? How do I buy, excercise, etc?

nathanfornash wrote:What can you tell me about Warrants? How do I buy, excercise, etc?

You can buy warrants same as shares through the broker.
You can convert the warrants on the stated date to shares paying the share price prevailed at the issue of warrants.

You can identify presently available warrants in the market by "stock code.W"
Eg.CLPL.W0012, CLPL.W0014 [these two have two different exercise dates]
GREG.W0001, GREG.W0002

Thanks, is there a limit to the number of warrants you can buy? Do you need to have physical certificates in hand

nathanfornash wrote:Thanks, is there a limit to the number of warrants you can buy? Do you need to have physical certificates in hand

Dear Friend,
Limit will be your ability to finance. ie. how much money you have.

After you buy if warrants go up you can sell it same as shares if the gain is satisfactory without waiting till conversion date.

If you wait till conversion date your buying price of the share would be "Warrant Price+Exercising Price" which is the share price at the time of warrant issue. When you calculate the capital gain these two prices need to consider.

Also, note warrants are not entitle to dividends.

nathanfornash wrote:Thanks, is there a limit to the number of warrants you can buy? Do you need to have physical certificates in hand

Warrants can be got two ways.

1) If you hold shares of a company who then decides/announces to offer warrants then you will be entitled to those warrants of that company. ( Sometimes they issue warrants free with a right issue) . These warrant are limited in number as they will be given by the company to you in some proportion decided by them. This is the primary way to obtain warrants.

2) Warrant holders from fact 1) above can then sell their warrants on the stock market. Then you can buy any amount from the stock market ( ofcouse you pay an additional amount to purchase them ), this is the secondary way to get warrants

In either case when the warrant execise date comes you will need to pay the exercise price to convert it to full/normal share.

Warrants normally trade at a discount to its normal share price. This is understanable as there is a cost to convert warrants to normal shares.

When the price of the normal share increases, we can expect its warrants also to increase in a rational market.

Therefore don't you all think that warrants are more attractive than its shares in a market where the normal share is expected to appreciate with time?

For example; Share is currently trading at Rs 50. Its warrant is trading at Rs. 20. An increase of Rs. 10 in the share price should result with an increase of Rs 10 in the warrant price. So the return on warrant is 50% while return on investing in the share is only 20%.

I can understand that the increase in share price may not necessarily triger similar price increase in warrant but still it should give better return than investing in the share.

This is purely from share trading viewpoint. Also you need to be careful in investing in warrants and always be aware of their intrinsic value and the behaviour of its normal share.

StocksWatch wrote:

I can understand that the increase in share price may not necessarily triger similar price increase in warrant but still it should give better return than investing in the share.

So is the warrant price determined by the share price or by the demand for warrants?

nathanfornash wrote:

StocksWatch wrote:

I can understand that the increase in share price may not necessarily triger similar price increase in warrant but still it should give better return than investing in the share.

So is the warrant price determined by the share price or by the demand for warrants?

mainly the warrant price fluctuate accordingly to the share price........so the share price drives the warrant's price.................

Will some one be kind to explain about share warrants and what are the benefits which can be obtained and what are the precautions to look on..

Thanks

Akalanka wrote:
Will some one be kind to explain about share warrants and what are the benefits which can be obtained and what are the precautions to look on..

Thanks

Akalanka,

You can refer to following post about warrants.

http://forum.srilankaequity.com/t2227-all-about-warrants?highlight=warrants

Also if you search keywork "warrants", you can find many other posts relating to warrants. Hope this helps.

StocksWatch wrote:

Akalanka wrote:
Will some one be kind to explain about share warrants and what are the benefits which can be obtained and what are the precautions to look on..

Thanks

Akalanka,

You can refer to following post about warrants.

http://forum.srilankaequity.com/t2227-all-about-warrants?highlight=warrants

Also if you search keywork "warrants", you can find many other posts relating to warrants. Hope this helps.

Thanks a lot and i got a nice idea about warrants..

but still do have small question..
if we are going to convert the warrants to normal how to check how much should pay more again ? is there any announcement ?

Akalanka wrote:Thanks a lot and i got a nice idea about warrants..

but still do have small question..
if we are going to convert the warrants to normal how to check how much should pay more again ? is there any announcement ?

This is called exercise price and it is generally announced by the company when they issue warrants.

thanks

just to know .. . from where we can find the exercising price of a previously issued warrant , ?

and ..

https://servimg.com/view/16108723/47

I just checked the above chart .. does it means the shares which are trading at a higher price than the intrinsic value are overvalued?? Question Question Question

And got to know that we should produce a letter received from the corresponding PLC regarding to Warrants to the broker to convert,, so when will we receive that letter. Rolling Eyes Rolling Eyes

Well , this would give you all the answers.

http://forum.srilankaequity.com/t1107-analysis-of-various-warrants-listed-on-the-cse

Akalanka wrote:
Will some one be kind to explain about share warrants and what are the benefits which can be obtained and what are the precautions to look on..

Thanks

warrants are issued at a fixed price.....
you get the chance to convert the warrant into a share in future agreed date.......
you have to pay the price of warrant when the warrants reached its expire date....

advantages.........
*when price of share appreciate,the warrant price also increasing.....
*warrants are cheaper than share price.
Ex-SEMB W15,SEMB W16,NTB W,CLPL W,REEF W,GREG W

Many thanks for all that had contributed valuable advice above. I have few warrants that i got free from REEF by purchasing the rights issued shares.

Could someone please advice when is the best time to sell my warrants..??
or is it advisable to keep them till maturity and then convert to shares..??

Normally how many dates will it take to convert warrants in to normal shares ??

slstock wrote:

nathanfornash wrote:Thanks, is there a limit to the number of warrants you can buy? Do you need to have physical certificates in hand

Warrants can be got two ways.

1) If you hold shares of a company who then decides/announces to offer warrants then you will be entitled to those warrants of that company. ( Sometimes they issue warrants free with a right issue) . These warrant are limited in number as they will be given by the company to you in some proportion decided by them. This is the primary way to obtain warrants.

2) Warrant holders from fact 1) above can then sell their warrants on the stock market. Then you can buy any amount from the stock market ( ofcouse you pay an additional amount to purchase them ), this is the secondary way to get warrants

In either case when the warrant execise date comes you will need to pay the exercise price to convert it to full/normal share.

Once the warrants are converted, is there a possibility that the share price could go down in the market due to dilution? If so, generally to what extent,? In that case, is it better to sell off the warrants before conversion or convert them by paying the nominal value and then sell off as normal shares ??

Thanks in advance and appreciate your valuable advice.

SalliMalli wrote:

slstock wrote:

nathanfornash wrote:Thanks, is there a limit to the number of warrants you can buy? Do you need to have physical certificates in hand

Warrants can be got two ways.

1) If you hold shares of a company who then decides/announces to offer warrants then you will be entitled to those warrants of that company. ( Sometimes they issue warrants free with a right issue) . These warrant are limited in number as they will be given by the company to you in some proportion decided by them. This is the primary way to obtain warrants.

2) Warrant holders from fact 1) above can then sell their warrants on the stock market. Then you can buy any amount from the stock market ( ofcouse you pay an additional amount to purchase them ), this is the secondary way to get warrants

In either case when the warrant execise date comes you will need to pay the exercise price to convert it to full/normal share.

Once the warrants are converted, is there a possibility that the share price could go down in the market due to dilution?

Thanks in advance and appreciate your valuable advice.

It depends on the share. But yes the share price can go down ( depending on market, share fundamentals/strength and it has happend for some companies in the past. ( Ex NTB , CLND etc). best to monitor overall market trend at that time. If it is negative chances are people will sell their converted warrants at lower prices as they already have profit. Then it will be the consolidation period. But after a while ( it can range for months) when these seller are gone it can go up again on news etc.

Note , some companies who are not in profits, and have massive warrant issues can have too many shares in the market . Note why SEMB.X is trading much lower than SEMB.N. SEMB.X had a 4 for 1 share rights and warrant issue. Comparatively too many new shares in the market now due to it.

Be careful with warrants especially CLPL W. coz, all the CLPLW12 holders got burned their hands.

SalliMalli wrote:Many thanks for all that had contributed valuable advice above. I have few warrants that i got free from REEF by purchasing the rights issued shares.

Could someone please advice when is the best time to sell my warrants..??
or is it advisable to keep them till maturity and then convert to shares..??

Quite frankly this depends on the price of the main share... When warrants gets listed the normal share price have a tendency to come down. But normally the warrant u buy has a exercise price and if you buy warrants from market, you have to add up both values to make up the total cost.

Suppose if you buy; ABC.W12 warrant from market for 20 which has a exercise price of 40 in 2012 and if the ABC.N price is now 75, ur buying it cheap..
And if the ABC.N price goes to 120 in 2012 at the time of conversion, u've actually paid 20+40 = 60 for the warrant and if the ABC.N price comes down to 100 after the conversion, still u have 100-60 = 40 rupees gain per share if you sell your shares..

Finally! be careful playing with Warrants! It is just like buying an ICEcream

Can we identify the exercise date of warrants by the stock code...?
e.g. Does ABC.W0012 mean it will be converted in 2012...?

dewminigamlath wrote:Can we identify the exercise date of warrants by the stock code...?
e.g. Does ABC.W0012 mean it will be converted in 2012...?

Can but not 100%. Coz you can remember CLPL W12, but converted in 2011.
At the same time GREG W2 - in 2012

so, confusing

slstock wrote:

SalliMalli wrote:

slstock wrote:

nathanfornash wrote:Thanks, is there a limit to the number of warrants you can buy? Do you need to have physical certificates in hand

Warrants can be got two ways.

1) If you hold shares of a company who then decides/announces to offer warrants then you will be entitled to those warrants of that company. ( Sometimes they issue warrants free with a right issue) . These warrant are limited in number as they will be given by the company to you in some proportion decided by them. This is the primary way to obtain warrants.

2) Warrant holders from fact 1) above can then sell their warrants on the stock market. Then you can buy any amount from the stock market ( ofcouse you pay an additional amount to purchase them ), this is the secondary way to get warrants

In either case when the warrant execise date comes you will need to pay the exercise price to convert it to full/normal share.

Once the warrants are converted, is there a possibility that the share price could go down in the market due to dilution?

Thanks in advance and appreciate your valuable advice.

It depends on the share. But yes the share price can go down ( depending on market, share fundamentals/strength and it has happend for some companies in the past. ( Ex NTB , CLND etc). best to monitor overall market trend at that time. If it is negative chances are people will sell their converted warrants at lower prices as they already have profit. Then it will be the consolidation period. But after a while ( it can range for months) when these seller are gone it can go up again on news etc.

Note , some companies who are not in profits, and have massive warrant issues can have too many shares in the market . Note why SEMB.X is trading much lower than SEMB.N. SEMB.X had a 4 for 1 share rights and warrant issue. Comparatively too many new shares in the market now due to it.

There is another,actually lucky situation in warrent convertion.That is you may get additional shares at exercise price which may be a very huge discount.This situation occurs when existing warrent holders do not convert their warrent.This happened with NTB Warrents.I got additional shares for just 35/= rupees.But unfortunately I applied for a few number of additional shares thinking that I would not get it.