Why would a company issue rights instead of warrants (and vice versa)?
Why would a trader or investor buy/sell rights instead of warrants or options (i.e. which situations make one of these more desirable than the other)?
Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.Sign up to join this community
A stock warrant is issued by the company whereas options are issued by the CBOE (USA).
Rights tend to have a very short expiration (weeks).
Options tend to have a shorter expiration than warrants (depends on the warrant's expiration and if the stock offers LEAPS).
Warrants can have very long expirations, as much as 5+ years.
Exercise of warrants causes dilution because the company issues new stock. Exercise of an option results in the transfer of existing shares between counterparties.
At issuance, the strike price of a right tends to be closer to share price and may be in-the-money. For warrants, it's typically out-of-the money.