More warrants with novelty features set to surface

IN "CCM's piggyback warrant offers vision of the future" (BT Hock Lock Siew, Jan 23) we predicted that more companies would follow construction firm CCM and issue shareholders with free, unlisted warrants as part of a rights issue.

As it turns out, it hasn't taken long at all - less than a month later, investment holding company Cedar Strategic announced a fund-raising exercise not too dissimilar to CCM's - a placement of 1.27 billion new shares that comes with 1.27 billion free, unlisted warrants. The net $4.35 million raised from the share issue is to be used for real estate projects, which is Cedar's main business, but as many might ask - why unlisted warrants?

The answer is simple - if the warrants are issued in-the-money (ie, the exercise or conversion price is below the share price) or at-the-money (ie, the exercise price is very close to the share price), then any recovery in the shares that pushes the price above the exercise price will greatly increase …