Timeline for Preferred Stocks: Why do you have to sell the detachable warrant to receive dividend?
Current License: CC BY-SA 4.0
5 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Jan 8, 2022 at 10:12 | vote | accept | user5646514 | ||
| Jan 6, 2022 at 16:08 | comment | added | Ryan | Call options and warrants are effectively the same, but warrants are attached to another security issued by the company itself for new shares and may have very low strike prices. Warrants are given as a 'kicker' upside to lower yield on preferred/debt. Call options are used for hedging purposes and speculative trading by 3rd parties. There is generally not a downside to a warrant. I guess my point is if a warrant 'prevents' dividends, then the warrant and preferred stock have conflicting value adds/detracts, so I have no idea what kind of investor would be interested in such a combo security. | |
| Jan 6, 2022 at 16:02 | comment | added | Ryan | If the warrant attached prevents a dividend from being received, then the warrant will decrease the value of the preferred stock relative to preferred stock that receives a dividend. The combined security (Preferred w/o div + warrant) may have a greater value than preferred stock w div depending on the warrant's value. | |
| Jan 6, 2022 at 8:09 | comment | added | user5646514 | Thanks for your answer! I wonder why the value of the preferred stock would be smaller with the warrant attached? Why wouldn't people want a call option on top of the shares? | |
| Jan 5, 2022 at 15:27 | history | answered | Ryan | CC BY-SA 4.0 |