Security Analysis by Benjamin Graham and David Dodd was first published in 1934. It is a fundamental book for serious students of value investing.
This chapter marks the beginning of Part 7 of the book. Here authors begin with the topic of Stock Option Warrants.
Warrants differ from subscriptions right in that they are longer-term, and the purchase price is usually higher than the current market price. However, they are similar to low-priced common stocks with a speculative capital structure which was discussed in chapter 41.
Warrants are a call on the future of the company from a qualitative perspective. But, that is usually difficult to ascertain. Quantitative factors are easier to figure out.
From a fundamental perspective, issuing warrants, in effect, reduces the value of the common stock. As most market participants don't understand this, warrants have been the subject of abuse.
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