Rights issue/warrants

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22-01-2020, 12:50 PM
justakiwi

Rights issue/warrants

Are a Rights Issue and Warrants Issue the exact same thing or is there a difference I’m not aware of?
22-01-2020, 01:32 PM
percy

Quote:

Originally Posted by justakiwi

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.
22-01-2020, 01:50 PM
blackcap

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.
22-01-2020, 02:02 PM
justakiwi

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?
22-01-2020, 02:12 PM
blackcap

Quote:

Originally Posted by justakiwi

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.
22-01-2020, 02:18 PM
percy

Quote:

Originally Posted by justakiwi

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?

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.