Question

Why should investors be concerned about a firm's outstanding warrants and convertibles?

Answer 1

The investor should be concerned about a firm's outstanding warrant and convertibles because that there is possibility of risk associated of dilution of common stock and also risk of lossing control of management. Also, the risk associate to convertible bond and warrant is having higfh possibility of bankruptcy than issing of common or preffered share. Moreover if the warrant and convertible bond remain duration is less or short durantion of bond then there is high risk associated. Also, issuing of bond is affecting to investor because of considerable loss of profit for company and investor which affect P/E ratio of the company.