What is an option bond?
The warrant bond is a special type of Industrial bond. It is also known as an option bond, warrant bond, subscription right obligation, bond warrant or stock warrent.
With the Convertible bond What the bond with warrants has in common is that, in addition to the rights from the bond, it also securitizes subscription rights to shares. In contrast to it, however, the paper is not exchanged for shares, instead it remains in place alongside the shares that were issued on the basis of the subscription rights contained in it until it is redeemed.
The core of a bond with warrants is the warrant, the holder of which can purchase the share at a fixed subscription price. If the share price rises, so does the value of the warrant. Because of the low capital investment, this happens disproportionately. On the stock exchange, this means that the price of the warrant together with the subscription price exceeds the price of the share. However, as the price increases, this additional price decreases because the chances of achieving further price gains are estimated to be lower.
The issue of a bond with warrants requires a resolution on the issue of the general meeting. A three-quarters majority is required. A bond with warrants results in three stock exchange listings:
- Price for the bond with warrant (warrant bond 'cam')
- Price for the bond without warrant (warrant bond 'ex')
- Price for detached warrants.
With the option bond, the borrowed capital remains until the end of the term of the bond. In addition, equity is created through the issue of new shares. In Germany, the option bond is not of great importance.