Rights vs. Warrants
Rights: short-term, below market. Warrants: long-term, above market.
What is Rights vs. Warrants?
Subscription rights come from preemptive rights: existing shareholders may buy new shares, usually below market price, for a short window of weeks. Warrants give the right to buy stock at a set price over years; at issuance that price is above market. Warrants are often attached to bonds or preferred stock as a sweetener to lower the issuer's borrowing cost.
Rights vs. Warrants: a worked example
Bonds issued with warrants to buy stock at $30 for five years, with the stock currently at $22.
More terms in Equities, Funds & Alternatives
Shareholder Rights (Statutory vs. Cumulative Voting)
Voting, preemptive rights, dividends when declared, inspection, limited liability.
Types of Preferred Stock
Cumulative, convertible, callable, participating, and floating-rate preferred.
American Depositary Receipt (ADR)
A dollar-denominated receipt for foreign shares, traded in the US.
Restricted & Control Stock (Rule 144)
Unregistered or insider-held stock with resale limits.
Employee Stock Options (ISO vs. NSO)
Incentive options get capital gains treatment; nonqualified options create income at exercise.
Technical Analysis
Forecasting prices from charts, trends, and trading volume.
Fundamental Analysis
Valuing a company from its financial statements, management, and industry.
Dividend Discount Model
A stock is worth the present value of its future dividends.