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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)?

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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.

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  • Thank you! Where do the shares come from when exercising rights/is this dilutive as well? Apr 2 at 23:31
  • While I have owned rights a good number of times via IPOs, I don't know the answer (didn't look at the details). I have read that they are non-dilutive but they can be dilutive so I'd guess that it depends on the terms of the rights. Perhaps a google search might turn up and answer. Apr 3 at 4:12

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