What is a Detachable Warrant?
A detachable warrant is a warrant that can be sold separately from the security to which it was originally attached.
How Does a Detachable Warrant Work?
For example, if Company XYZ issued $100 million of bonds with warrants attached, each bondholder might get a $1,000 face-value and the right to purchase 100 of Company XYZ stock at $20 per share over the next five years. Warrants usually permit the holder to purchase common stock of the issuer, but sometimes they allow the purchaser to buy the stock or bonds of another entity (such as a subsidiary or even a third party).
Warrants are often detachable. That is, if an investor holds awith attached warrants, he or she can sell the warrants and keep the .
Warrants are not the same as underlying security's market price at the time of issuance, whereas warrant exercise prices are typically 15% above market price at the time of issuance. Also, companies often issue stock purchase rights only to existing shareholders and they also have very short lives -- generally two to four weeks.options. options are not detachable and they often expire far before warrants do (usually less than a year, versus five or more for warrants). Warrants are also not the same as stock purchase rights. The exercise price of a stock purchase right is usually below the
Why Does a Detachable Warrant Matter?
Warrants trade on the major exchanges. In some cases where warrants have been issued with dividend as long as they hold the warrant. Thus it is sometimes advantageous to detach and sell a warrant as soon as possible if the investor expects to earn more from dividends., stockholders may not receive a