Undetachable Stock Warrant – Definition

Cite this article as:"Undetachable Stock Warrant – Definition," in The Business Professor, updated July 30, 2019, last accessed August 12, 2020, https://thebusinessprofessor.com/lesson/undetachable-stock-warrant-definition/.

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Undetachable Stock Warrant Definition

An undetachable stock is the same as a convertible stock, it refers to a bond that can only be converted to a stock at maturity or redemption but cannot be sold as distinct from the bond. Hence, an undetachable stock warrant gives its holder the right to substitute a bond for another security, usually a stock at redemption. Oftentimes, the security for which the bond is substituted offers better return. An undetachable stock warrant is used by holders when they want to generate profit from a bond by converting it into stock.

A Little More on What is an Undetachable Stock Warrant

When a preferred stock is issued, it usually comes with a warrant, this warrant cannot be detached from the preferred stock. If the warrant holder decides to exercise the warrant right, a specific amount of stock can be purchased at a specific price. An undetachable warrant allows a holder to substitute a bond for a stock at redemption, the warrant cannot be sold separately form the bond.

References for “Undetachable Stock Warrant

Academic research for “Undetachable Stock Warrant

Stock Purchase Warrants and Rights, Garner, R. D., & Forsythe, A. S. (1930). Stock Purchase Warrants and Rights. S. Cal. L. Rev., 4, 269.

The taxation of corporate issuers of warrants, Auster, R. (1978). The taxation of corporate issuers of warrants. Taxes, 56, 213.

 

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