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 which can reduce an 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.
E)None of the above.

Question

Quizplus · Accepted Answer

Exercise of warrants creates new shares, which increases the total number of shares outstanding. This increase in the number of shares can dilute the ownership and earnings per share, which can reduce the individual share value. Therefore, option B is the best answer as it correctly reflects the impact of exercise of warrants on the share value.

The Exercise of Warrants Creates New Shares Which