What are Share Warrants? How Risky?

smallville · 26 Re: What are Share Warrants? How Risky? Sun Sep 18, 2011 5:54 pm

smallville

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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..

m2_yapa · 27 Re: What are Share Warrants? How Risky? Sun Sep 18, 2011 8:18 pm

m2_yapa

Senior Manager - Equity Analytics

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

dewminigamlath · 28 Re: What are Share Warrants? How Risky? Tue Sep 20, 2011 6:51 pm

dewminigamlath

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

bakapandithaya · 29 Re: What are Share Warrants? How Risky? Tue Sep 20, 2011 7:01 pm

bakapandithaya

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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

rijayasooriya · 30 Re: What are Share Warrants? How Risky? Tue Sep 20, 2011 8:17 pm

rijayasooriya

Senior Vice President - Equity Analytics

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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.

capitalgain · 31 Re: What are Share Warrants? How Risky? Tue Sep 20, 2011 11:56 pm

capitalgain

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rijayasooriya wrote:

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.

Sstar · 32 What are Share Warrants? How Risky? Tue Jul 29, 2014 11:44 am

Sstar

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Stock warrants are similar to options because they give an investor the option to purchase a share of stock at a given price at some point in the future. The true difference between a warrant and an option is the issuer. An option is issued by the market exchange; a warrant is issued by the company offering the stock.

Why Offer Warrants?

Companies offer warrants on their shares when they want to boost investor confidence. They are predicting the value of their stock will go up; if it does, then investors will have greater confidence in the stock in the future. For this reason, warrants are often issued at the same time a company issues a new stock.

Why Buy Warrants?

As an investor, you have the opportunity to earn a very high return on investment with warrants. Warrants are high risk, high reward certificates that are transferable and sellable. This makes them very flexible, and they can be attractive to investors. They are popular with hedge funds and strategists as well.

How do you exercise a stock warrant?

A stock warrant is always issued with an exercise date and price. American warrants can be exercised any time before the exercise date at the exercise price. With European warrants, you can only exercise the warrant on the exact exercise date. When you exercise a warrant, you can notify your broker or the issuing company with either your put or call order. Warrants are issued directly by companies. As a result, when you exercise the document, the company will be the one that issues you the shares directly.

Read more: http://www.finweb.com/investing/what-are-stock-warrants.html#ixzz38pqeNj1R

keeper · 33 Re: What are Share Warrants? How Risky? Tue Jul 29, 2014 10:40 pm

keeper

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මොනවද?මේ කොටස් බලපත්රව නැතිනම් Warrants –

කොටස් වෙළෙඳපොළේ ගනුදෙනු කළ හැකි උපකරණයකි (Trading Instrument). අනාගතයේ දී සමාගම තුළට යම් මුදල් ප්රමවාහයක් ගෙන්වා ගැනීමේ අරමුණින් මේවා නිකුත් කෙරේ.

එය සාමාන්යඳයෙන් නිකුත් කරනුයේ සමාගමක් හිමිකම් නිකුතුවක් හෙවත් අයිතිවාසිකම් නිකුතුවක් (Right Issue) සිදුකරනු ලබන අවස්ථාවක දීය. මෙහිදී හිමිකම් නිකුතුවේ දී අදාළ හිමිකම් කොටස් (Right Shares) මුදල් ගෙවා ලබා ගන්නා ආයෝජකයින්ට සලසනු ලබන අතිරේක වරප්රgසාදයක් ලෙස මෙම කොටස් බලපත්රෙ නොමිලයේ ලබා දෙනු ඇත.

මෙහි ඇති විශේෂත්වය නම් යම් නිශ්චිත කාලපරිච්ඡේදයක් පුරාවට මෙම කොටස් බලපත්රත කොටස් වෙළෙඳපොළේ ගනුදෙනු කළ හැකිවීමයි. අදාළ කාලසීමාව අවසානයේ දී අදාළ සමාගම වෙත, එක් කොටසක් වෙනුවෙන් පෙර නියම කරන ලද යම්කිසි මුදල් ප්‍රමාණයක් ගෙවා, ඒවා එම කොටස් බලපත්රම සාමාන්යස කොටස් බවට පරිවර්තනය කළ යුතු වේ.

එසේ අතිරේක මුදලක් ගෙවා එම කොටස් බලපත්ර්, සාමාන්යක කොටස් බවට පරිවර්තනය කිරීමට කටයුතු නොකරන්නේ නම්, ඒ අවස්ථාවේ කොටස් බලපත්රක වල හිමිකාරීත්වය දරන ආයෝජකයාට අලාභ ඇතිවිය හැකි අවස්ථාවක් උද්ගත විය හැකිය. මන්ද අදාළ කොටස් බලපත්රා, සාමාන්යා කොටස් බවට පරිවර්තනය කරන අවස්ථාවේ දී එහි හිමිකාරීත්වය දරනුයේ, කොටස් වෙළෙඳපොළෙන් කොටස් බලපත්රත මිල දී ගෙන ඇති ආයෝජකයෙකු නම් මින් ඉදිරියට ඒවා වෙළෙඳපොළේ ගනුදෙනු කිරීමට ඇති ඉඩකඩ අහිමි වීමයි. පළමු අවස්ථාවේ දීම කොටස් බලපත්රක නොමිලයේ හිමි වූ ආයෝජකයාට එවැනි අවදානමකට මුහුණ දීමට සිදු නොවේ.

එමෙන්ම අතිරේක මුදලක් ගෙවා අදාළ කොටස් බලපත්රේ, සාමාන්යඅ කොටස් බවට පරිවර්තනය කිරීමට කටයුතු යොදන ඇතැම් අවස්ථාවල දීද ආයෝජකයාට අලාභ ඇති විය හැකි තත්ත්වයක් උද්ගත විය හැකිය. මන්ද අදාළ සමාගමේ සාමාන්ය් කොටසක වත්මන් වෙළෙඳපොළ මිලට වඩා වැඩි ප්රලමාණයක් ගෙවා ඒවා සාමාන්යස කොටස් බවට පරිවර්තනය කළ යුතු වන අවස්ථාවක දීය.

තවද කොටස් බලපත්රක සාමාන්යව කොටස් බවට පරිවර්තනය වන අවස්ථාවක දී සිදුවන්නේ සමාගමේ සාමාන්යර කොටස් ප්රොමාණයේ වැඩිවීමකි. වෙළෙඳපොළේ පවතින කොටස් ප්ර මාණයේ වැඩි වීමක් සිදුවන අවස්ථාවක දී සාමාන්යැයෙන් සිදුවන්නේ අදාළ කොටසක වෙළෙඳපොළ මිල පහළ යාමකි.

සාමන්යවයෙන් කිසියම් ආයෝජකයෙකු මෙම කොටස් බලපත්ර , වෙළෙඳපොළෙන් මිල දී ගෙන ගනුදෙනු කිරීමට පෙළඹී ඇත්නම් වඩා කල්පනාකාරී විය යුතුය. මක් නිසාද යත් එය ඉතා අවදානම්කාරී ගනුදෙනු කළ හැකි උපකරණයක් වන බැවිනි.

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