Rights, Warrants, and ADRs: Rapid Fire
Chapters in this video
- 0:00 Warrants above market, rights below market
- 1:15 Carla the shareholder versus Riley the rep
- 2:33 Rights versus warrants side-by-side showdown
- 3:32 The 1-to-1, 30-90, and 2-to-5 numbers to memorize
- 4:24 Cum-rights and ex-rights formula trick
- 4:55 No dividends or votes until exercised
- 5:13 Standby underwriter firm-commitment guarantee
- 5:41 ADR definition and dollar-trading convenience
- 6:13 The three ADR levels capital-raise distinction
- 6:40 Currency risk survives ADR conversion
- 7:17 Reporting standards and unsponsored ADRs
- 7:47 Rapid-fire exam recap
What this video covers
- Why subscription rights start below market price to preserve proportionate ownership, while warrants start above market as long-term sweeteners attached to bonds or preferred stock
- How to apply the duration numbers 30-90 days for rights versus 2-5+ years for warrants, and why perpetual warrants still need time value premium
- The cum-rights and ex-rights value formulas, and why "cum means with so add one" and "ex means without so no plus one"
- Why neither rights nor warrants confer voting rights or dividends until exercised, and how both create new shares upon exercise
- What a standby underwriter guarantees on a firm-commitment basis when existing shareholders let rights expire
- How ADR levels differ: Level 1 trades over the counter, Level 2 lists on exchanges, and only Level 3 can raise new capital in a U.S. public offering
- Why ADRs trade in U.S. dollars but do not eliminate currency risk, since foreign dividends are converted and exchange-rate swings still move value
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