This paper examines sequential exercise strategies by warrant holders and the gain from hoarding w arrants. Several obstacles to acquiring large blocks to exploit seque ntial strategies are analyzed. First, several reinvestment policies a re identified for which sequential exercise is not advantageous, ther eby eliminating the gain from hoarding. However, sequential exercise strategies may be advantageous for monopoly or oligopoly warrant hold ers, even absent dividends, because using exercise proceeds to repurc hase stock or to expand the firm's scale increases the riskiness of e quity. Second, oligopoly warrant holders can receive a smaller warran t value than perfectly competitive warrant holders, suggesting a pote ntial cost to unsuccessful hoarding. Copyright 1988 by American Finance Association.
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Article provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 43 (1988) Issue (Month): 2 (June) Pages: 493-506 Download reference. The following formats are available: HTML
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