Question

Principles of Finance II WEEK 6: Discussion Prompt #2 A stock warrant is a way for a company to raise money through equity (stocks). After conducting research on stock warrants, discuss the pros and cons of stock warrants versus stock options. Which choice would benefit your company?

Answer 1

Pros of Stock Warrants
1. Stopck Warrant gives the right to buyer to buyat a lower excercise orice than the price of share.It helps in rasing capital for the company.The company itseld issues stovk warrants unlike stovkoptions . Stock warrant helps in rasing capital for company whereas stock options don't allow company to raise money.

2. Stock options are only for small option period of 2-3 years wheras warrants have usuually long exercise period of nearly 15 years. Stock warrant is better investment for long term.

Cons: of Stock Warrants: If investor is planning for short term stock options seems betetr than warrants..No dividend payout is given to stock warrants .Stock warrants are worthless when no capital gains is realised in the stipulated time period.

For a company stock warrants is better becauuse the company can raise equity through it. It can hedge against capital loss.

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