The exercise of warrants creates new shares which
A)increases the total number of shares but does not affect share value.
B)increases the total number of shares and reduces the individual share value.
C)does not change the number of shares outstanding, similar to options.
D)increases share value because cash is paid into the firm at the time of warrant exercise.

Question

Quizplus · Accepted Answer

The exercise of warrants results in the creation of new shares, increasing the total number of shares outstanding. Since the value of the company remains the same, the increase in the number of shares reduces the value of each individual share, leading to a decrease in share price.

The Exercise of Warrants Creates New Shares Which