Are a Rights Issue and Warrants Issue the exact same thing or is there a difference I’m not aware of?
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Are a Rights Issue and Warrants Issue the exact same thing or is there a difference I’m not aware of?
Try my best.
You own a 100 shares in company "A" whose shares are currently trading at $1..
They want to raise more capital,so they have a rights issue say a 1 for 10 at 90 cents.So you can buy 10 shares at 90 cents.
Some companies let you sell your rights should you not want to take them up.
There is a period when you can sell your rights.
To sweeten the offer the company may add a warrant to each right taken up.This warrant may be for two years, and the conversion price may be $1.10.
Often these warrants can be sold.They are more often called options.
Percy is correct. Also generally rights are at a discount to the SP, whilst warrants when issued will often be at a premium to SP. Although that is not always the case.
I’m sorry but I’m still not really seeing the difference. I exercised the latest KFL warrants issue last year. I understand how that works. If that had been a rights issue instead, what would have been different? Someone on another forum wanted an explanation for the upcoming Paysauce rights issue - I explained it to them the way the KFL warrants issue worked for me. Was that incorrect?
Rights are generally very short term. A company is in need of cash (for whatever reason) and wants the money "immediately". A warrant is usually a longer term instrument, often added as a bonus or sweetner to shareholders.
A Warrant and Option are the same sort of thing. A rights issue is not an option, it is a demand for cash, although you do not have to take up your rights. I am a bit pressed for time so a lengthier explanation is not forthcoming, but that is sort of the difference that I would say distinguishes the two.
The KFL warrants most probably came if KFL had raised capital,and for each right taken up they would have attached a warrant to buy KFL shares at a certain time in the future.
These KFL warrants/options are tradeable.
Makes taking up rights more attractive.
The likes of KFL earn their living from funds under management,therefore they like raising more capital,so they can increase their earnings.
A 1 for 10 rights issue with a warrant attached is a smokescreen.
You pay taking up your rights,and you pay again converting you warrant when they mature.
So the 1 for 10 is really a 2 for 10.....20% extra raised not 10%
Fisher funds use to be so so managers,however I believe the new owners have increased performance.I follow stocks ,not funds, so perhaps I should not comment.