2.3 Rights and Warrants & 2.4 Stock Dividends and Stock Splits

Stock rights

is preemptive rights which allows stockholders to purchase new shares to sustain appropriate ownership at lower than mkt price

• ex on pg 34

Warrant

to use u pay upfront to have a locked in price to pay for a security at a later date. Do this in the hopes that it security will appreciate

• ex. td pay $2 to pay 12$ for security in 1 yr. When that time comes around security is worth $16 so you make $2 profit

Stock dividend

company pays w dividends w stock

• ex. if you have 100 shares and company issues a 10% stock dividend u get 10 shares

Stock Split

company divides existing share of stock into new shares

• amount of shares increases but total value remains the same

Forward split

ex. 2 for 1 split - every split you own becomes 2 shares

• 100 shares / $100 per share then 200 shares / $50 per share

• this is done to improve tradability

Even and uneven splits

• even - is 2 for 1 or 3 for 1

• uneven - ratios like 3 for 2 or 5 for 4

Reverse split

ex. 1 for 10 reverse split - every 10 shares becomes 1 share

• 1k shares at $1 per share becomes 100 shares at $10 per share