Ping An Securities Derivatives Department Zhang Junjie
According to different issuers, warrants can be divided into covered warrants and equity warrants. Covered warrants are warrants issued by third-party institutions such as securities companies, while equity warrants are warrants issued by listed companies with their own shares as the subject matter. In addition to the different issuers, there is another important difference between covered warrants and equity warrants in the exercise link. The exercise of covered warrants will not affect the total share capital of listed companies. When exercising equity warrants, the listed companies issue new shares to meet the exercise requirements of warrant holders. Therefore, the exercise of equity warrants will lead to an increase in the total share capital of listed companies, that is, the exercise of equity warrants has a dilution effect. So, will the exercise of equity warrants lead to a sharp drop in the stock price?
If the market is effective, there is no bubble and no undervaluation negotiable securities In the market, the price of a security will reflect the value of the asset it represents. Assume that the value of a listed company is V and its total share capital is N, shares The price is S, the number of equity warrants issued by the company is M, the market price of the warrants is W, and the exercise price of the warrants is K. The value of listed companies that have issued equity warrants is the sum of stock market value and warrant market value, that is, V=S × N+W × M. If all the equity warrants are exercised, the value of the company will become S × N+W × M+K × M. At this time, the total share capital of the company is increased to N+M, so the stock price should be (S × N+W × M+K × M)/(N+M). On the expiration date of the warrant, theoretically, the premium rate of the warrant should be equal to 0, and the price of the warrant should be equal to the intrinsic value of the warrant, that is, W=S-K. Otherwise, there will be risk-free arbitrage opportunities, so there will be W+K=S. Therefore, the stock price after exercise (S × N+W × M+K × M)/(N+M)=S × (N+M)/(N+M)=S. This shows that the price of equity shares will not change before and after the exercise, and the exercise of equity warrants will not lead to a sharp fall in the price of equity shares.
From another point of view, if the stock price of the positive shares will fall sharply after the exercise, then a rational investor will sell the shares the day before the exercise until the stock price reaches the expected stock price after the exercise. Therefore, as long as the equilibrium state is formed, there will be no significant difference in the positive share price before and after the exercise. In other words, there is no theoretical basis for the exercise of equity warrants leading to a sharp fall in the share price of the stock. Some investors equate the increase in the company's share capital caused by the exercise of equity warrants with the allotment of shares, and think that the stock price of the regular shares will be delisted after the exercise, leading to the decline of the stock price. In fact, the two are completely different. The stock price of the stocks with rights falls after the ex right, but the investors who hold the stocks will not have any losses. However, before the exercise of equity warrants, the positive shares do not contain rights, so there is no ex right problem. If the stock price falls, investors who originally held shares will inevitably suffer losses.
Today is Changdian CWB1 The warrant will enter the exercise period from tomorrow on the last trading day of, which is also the first equity warrant in China to mature for exercise. If today's Changdian CWB1 discount is low (less than 3%), investors should sell warrants to avoid the risk of market and positive stock adjustment; If the discount is high (more than 5%), it can hold the exercise. From the above analysis, investors do not have to worry about stocks Yangtze Power The share price of the Company will drop sharply due to the exercise of warrants. The impact of warrant exercise on the stock price, if any, is only slight and psychological.
For more warrant information, please visit Ping An Securities warrant website http://www.pa18.com/warrants
