Category: Money tips Release Date: 2007-04-29
At present the share-trading scenario, the greatest impact of a program is trying to resolve the warrant. Discussion of the split share structure has a basic premise, namely, to minimize market volatility, protecting the interests of small shareholders in circulation losses. It is in this sense, I think it warrants it very difficult to solve the split share structure.
Warrants a starting point has merit
Most of the programs have seen so far have implied a basic premise or assumption that the outstanding shares of the investment risk is much higher than the non-tradable shares, therefore, the prices of tradable shares in addition contains the liquidity premium in addition, it should require a relatively high risk premium. Obviously, if the non-tradable shares did not want to pay the liquidity premium and risk premium would just like to direct market traded will inevitably lead to tradable shares fell sharply. Warrants designers may be trying to interest or the outstanding shares of the outstanding shares included in the price of the liquidity premium and the risk premium with warrants to represent, or a spin-off with the warrants in order to reflect its value alone, and through the market to find its price . Clearly, this line of thought further indication of the outstanding shares of shareholders of the stock split on the issue of demand is reasonable. But the use of warrants to solve the split share structure has a major flaw or even fatal problem, that is, the interests of related parties due to the manipulation of the price of warrants at last find the price is likely to be ineffective, its outcome is likely to be the outstanding shares of inadequate compensation.
Warrants the prices are more easily manipulated
Some scholars believe that each company decentralized decision-making by the shareholders of tradable shares and non-tradable shareholders negotiate to determine the share-trading scheme is not only inefficient, and prone to manipulation by institutions. He proposed to put warrants to solve tradable shares, the warrants can be traded.
International empirical research demonstrates that the flow of the stock warrants trading really will have an impact on the underlying stock, warrants more sensitive to price, relative to the underlying stock, warrants warrants leverage would make the price more easily manipulated. Institutions can manipulate both the warrant price, but also by manipulating the price of warrants to suppress the underlying stock price, which is non-tradable shares tradable shares, and no good can only make the problem more complicated. In fact, the market price of games to find warrant in itself is tantamount to encouragement and connivance of authority to manipulate stock prices.
With the new shares to pay Put Warrants
May cause a greater loss of the outstanding shares of
With the put warrants for the outstanding shares of lock-price risk, then once resolved tradable shares fell tradable shareholders, the stock sell to? Since the put warrant is a listed company issued, the outstanding shares of the shareholders at this time is not a listed company should sell its shares? Clearly this is impossible: first, a listed company and hate only the means for misappropriating too small, generally will not pay for repurchase shares; second, most of the listed company's financial situation does not allow; Third, the "Securities Act" restricted .
The scholars have suggested that the listed companies on the issuance of new shares to tradable shares for compensation. Logically, since the compensation is for the outstanding shares, these shares should be given free of charge flow to shareholders. But since it is Major Holders, to the provisions of warrants exercisable at a price that is superfluous. If these shares still in circulation and then pays for shareholders, or shareholders of tradable shares is not only can not sell their own stock warrants held by the issuer that a listed company (Note: This is the definition of Put Warrants), which not only failed to be compensated, but still have to put money or by the agreed exercise price of warrants to purchase shares. Whether or not these shares tradable shareholders to buy yet, can be sure that expansion is bound to exacerbate stock shares fall further, its outcome and the mind is totally contrary to the loss of circulating shares is more heavy.
The key is not true warrant price
Clearly, the non-tradable shares would have preferred to reduce the outstanding shares of the obligation to compensate. To achieve this goal, the non-tradable shares is necessary to try to maintain stock during the transition period. Rather than the maintenance of the outstanding shares of stock that is the best means of manipulating stock prices, that is, as far as possible during the transition period not to sell the stock until after the end of the transition period, non-tradable shares lifted the obligation to compensate, you can rest assured that sell their own stocks. This means that the stock split to bring the outstanding shares of the risks and losses during the transition period and not fully released or fully reflected, can be expected that the inevitable transition period, stock prices continued to fall after the end of, the outstanding shares of inadequate compensation. Outstanding shares will be found far beyond its actual loss to be compensated.
To extend the split share structure of the transition period can not overcome this problem. For the non-tradable shares, they have been waiting for a few years or even 10 years, and now why not wait another few months? On the contrary, the transition period is too long, no different from investors in pain. It is used to solve the split share warrant can not be avoided is also unbearable sorrow.
