Compare and Contrast Warrants and Rights

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The Answer is Warrants and rights are related to stocks and bonds. They neither represent ownership in the issuing company nor are they a form of debt. Rather, they only represent the privilege of purchasing a specified corporate security at a particular price within a specified period of time. Ownership of these instruments, however, is somewhat episodic rather than of continuous interest.
Warrants allow the holder to purchase a corporate security - usually common stock - at a given price within a specified period of time. This time period may be definite or indefinite. The company may issue warrants to shareholders or creditors when a new stock or bond issue is released as an inducement to purchase these securities. Warrants may be traded on stock exchanges after the security has been issued.
Rights differ from warrants in one important respect; unlike warrants, rights have short expiration dates, generally extending between 2 to 10 weeks. Rights to purchase a common stock are often given to shareholders when additional stock is issued. Shareholders are then entitled to purchase more stock in proportion to their current holdings in order to maintain their percentage equity in the firm. Depending on the particular issue, rights may or may not be traded by the original owner in a secondary market.

Compare and Contrast Warrants and Rights

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