CCM's piggyback warrant offers a vision of the future

MUCH can be learnt from construction firm CCM Group's warrants issue, arguably one of the most innovative ever seen in the local market. Corporate finance houses might pick up a tip or two from the way the issue was structured by CCM's sponsor, Prime Partners, while traders could possibly learn a trick or two from trading the associated instruments.

In December last year, CCM proposed a bonus issue of 10 warrants for each share held, with these Bonus Warrants (BW) bearing an exercise price of one cent each. A total of 1.7 billion warrants were issued by the company with an expiry three years hence in December 2016. At the time, CCM's shares traded at around six cents, so the proposed warrant was priced very deep in-the-money.

So far, the issue appears pretty much the same as dozens of others. However, it included a novel twist - for every BW that is exercised, the company will issue a "piggyback warrant" (PW) that carries an exercise price of 1.1 cents.