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Warrants VS Convertible Bonds

What are the major differences between warrants and CB?? How to account for at year-end date?? and what factors would affect the valuation at year-end?? How the dilutive effect appear in the FS??

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  • 1 decade ago
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    Warrants are also issued with publicly distributed bonds and new issues of common stock In most cases, warrants are attached to the bonds when issued. The loan agreement will state whether the warrants are detachable from the bond, that is, whether they can be sold separately. Usually the warrant can be detached immediately.

    A convertible bond is similar to a bond with warrants. The most important difference is that a bond with warrants can be separated into distinct securities and a convertible bond cannot. A convertible bond gives the holder the right to exchange it for a given number of shares of stock anytime up to and including the maturity date of the bond.

    Warrants and convertibles cause dilution to the existing shareholders. When warrants are exercised and convertible bonds converted, the company must issue new shares of common stock. The percentage ownership of the existing shareholders will decline. New shares are not issued when call options are exercised.

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