Lg5 164 stock purchase warrants stock purchase

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Unformatted text preview: nd describe the general relationships among them. LG5 16.4 Stock Purchase Warrants stock purchase warrant An instrument that gives its holder the right to purchase a certain number of shares of common stock at a specified price over a certain period of time. Stock purchase warrants are similar to stock rights, which were briefly described in Chapter 7. A stock purchase warrant gives the holder the right to purchase a certain number of shares of common stock at a specified price over a certain period of time. (Of course, holders of warrants earn no income from them until the warrants are exercised or sold.) Warrants also bear some similarity to convertibles in that they provide for the injection of additional equity capital into the firm at some future date. Basic Characteristics Hint One of the major reasons for attaching a warrant or offering a security as a convertible is that with either of these features, investors do not require the issuing firm to pay an interest rate that is as hi...
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