This book examines two types of equity warrants:
those issued directly by the company into its own equity or into the equity of a company in which has a stake
covered warrants, which are issued by a third party and are exercisable into the shares of another, unrelated company, a bundle of shares or sometimes a stock exchange index.
By reading this book, you will find out about:
The basic terms and conditions of equity warrants – their definitions and explanations
The different statistical and mathematical methods of analyzing a warrant’s value
How to determine the appropriateness of the equity warrant as a capital instrument from an issuer’s viewpoint
The investor’s perspective on the equity warrant compared to other capital market instruments
Statistical and descriptive analysis of the main markets for equity warrants – the Euromarkets and the Swiss domestic market
The growth of the covered warrant activity in the Euromarkets
By the same author: Convertibles: An International Perspective, 2nd edition
Table of Contents
Biography
Acknowledgements
Introduction
1. Understanding Warrants
Basic terms of an equity warrant
Additional terms and conditions of warrants
Bond terms
2. Warrant calculations and analysis
Components of warrant value
Gearing
Break-even
Capital fulcrum point
Volatility
Valuing the warrant as an equity option
3. The issuer’s perspective
Issuer criteria
Covered warrants
Bond with warrants issues compared with share issues
Bond with warrants issues compared with convertible issues
Naked warrants
Shares with warrants
4. The new issue process
Roles of the participants
Selecting a lead manager
Obtaining required authorizations
Timetable
5. Documentation
Pre-launch
Signing
Closing
Appendix: IPMA Standard forms
IPMA Screen and Telephone Invitation Check-list for issues of debt and equity related debt instruments
Standard Form Agreement among Managers Versions 1, 2 and 3; French, German and new York Law Versions
IPMA Standard Terms for Subscriptions Agreements
6. Accounting and tax treatment
Accounting for equity warrants
Tax treatment
7. The secondary market
Share price level
Time until expiry
Share price volatility
Interest rate movements
Dividend level
Foreign exchange rates
Liquidity
Terms and conditions
Emerging market equity warrants
8. The investor’s perspective
Advantages
Disadvantages
Warrants compared with other equity-related instruments
9. The Euromarkets
The primary Eurobond market
The maturity profile of Eurobonds with warrants
Lead managers of Euromarket bond with warrants issues
Euromarket bond with warrants issues by region
Euromarket bond with warrants issues by currency
Share with warrant issues
10. The Swiss Market
The Swiss franc bond market
The Swiss franc bond with warrants market
Swiss franc bond with warrants issues by region
Terms of issue
Regulations
Lead managers of Swiss franc bond with warrants issues
European issuers
Asian issuers
11. The covered warrant market
History
The Euromarket covered warrant
Regulation
Secondary market
Types of instrument
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