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Warrants and Convertibles

In: Cases in Financial Management Applications for Financial Analysis

Author

Listed:
  • Elizabeth Chorvat
  • Terrence Chorvat

Abstract

This case addresses securities that allow the holders to acquire stock directly from the issuing corporation either by purchase (warrants) or by exchanging convertible debt of the corporation for its stock. One can deem warrants and convertible debt as two different types of the same category of securities. That is, convertible notes can be thought of as debt with an embedded warrant allowing one to view both of them as securities that allow the holder to purchase stock directly from the issuer. The case discusses when a corporation might want to issue these types of securities and examines in particular the issuances of convertible debt by Amazon and Tesla. These two examples illustrate different strategies for the use of these securities.

Suggested Citation

  • Elizabeth Chorvat & Terrence Chorvat, 2023. "Warrants and Convertibles," World Scientific Book Chapters, in: Ivan E Brick & Harvey A Poniachek (ed.), Cases in Financial Management Applications for Financial Analysis, chapter 20, pages 323-354, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811216749_0020
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    More about this item

    Keywords

    Corporate Finance; Financial Management; Financial Tools for Analysis and Application;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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