Warrants – Should You Ever Exercise

Warrants – Should You Ever Exercise

Frequently, we are asked whether warrants should be exercised if they are trading in the money.

Of course, the first event that must happen is that the common shares are trading above the exercise price of the warrants which means the warrants are ‘in the money’.

My answer to the exercise or not, is always the same, WHY?

Why would you want to exercise the warrants?

For U.S. investors, this is basically a non-issue because virtually all of the warrants trading on the resource shares are on Canadian companies and the warrants are not registered in the U.S.  U.S. investors can buy and sell the warrants, but, not exercise them, no problem.

For Canadian investors, yes, you could exercise the warrants, but why?

If you own warrants of a company you like, you will need to have your brokerage firm send the warrant certificate to the company’s transfer agent along with the exercise price at which point they would send you the common shares of the company. But why, we ask?

As a Canadian investor, if you own warrants which are ‘in the money’, we see just selling the warrants in the market and if you really like the company and want to continue with them, then just purchase the common shares.

Simple, clean and saves a lot of time and paperwork and you are in the exact same position.

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    Dudley

Dudley Pierce Baker – Owner/Editor – Guadalajara/Ajijic, Mexico
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