Which of the following is not a similarity between convertible securities and warrants?
A) Both tend to reduce agency costs.
B) The purpose of both is the deferred issuance of common stock.
C) Both give the company full control over when the common stock is issued.
D) All of these are correct.

Question

Quizplus · Accepted Answer

Convertible securities and warrants both provide the option to convert into common stock at a later date, which defers the issuance of common stock. Additionally, both securities tend to reduce agency costs by aligning the interests of shareholders and management. However, warrants are typically sold by the company to raise capital, whereas convertible securities are often sold to bondholders as a way to reduce interest payments. While both securities give the holder the option to convert into common stock, only convertible securities give the company the ability to control when the common stock is issued. Warrants are issued with a set expiration date and do not give the company control over when the common stock is issued. Therefore, the correct answer is C.

Which of the Following Is Not a Similarity Between Convertible