Replies to post #526 on Idera Pharmaceuticals Inc (IDRA)

[lucky9]

One warrant equals one share of stock. All you have to do is pay the one cent to have the warrant converted into a share when u want to. Think of it as a number of shares on layaway.

[lucky9]

Warrant (finance)
This article is about financial instrument. For for the payment method, see warrant of payment.
In finance, a warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiry date.

Warrants and options are similar in that the two contractual financial instruments allow the holder special rights to buy securities. Both are discretionary and have expiration dates. The word warrant simply means to "endow with the right", which is only slightly different from the meaning of option.

Warrants are frequently attached to bonds or preferred stock as a sweetener, allowing the issuer to pay lower interest rates or dividends. They can be used to enhance the yield of the bond and make them more attractive to potential buyers. Warrants can also be used in private equity deals. Frequently, these warrants are detachable and can be sold independently of the bond or stock.

In the case of warrants issued with preferred stocks, stockholders may need to detach and sell the warrant before they can receive dividend payments. Thus, it is sometimes beneficial to detach and sell a warrant as soon as possible so the investor can earn dividends.

[Manti]

In layman's terms, there are common shares, which have voting power. The SEC has regulations regarding how many shares can be held and under what conditions. They do this to protect public companies from those who hold a large number of shares who might use them in a manner to harm the company or other shareholders.

Warrants are an entitlement to shares when the required conditions are met to exercise them (payment, etc). They do not have voting rights, so they are exempt from the SEC rules that pertain to common shares.

Baker Brothers wanted a large stake in IDRA, and they could not have done it by buying common shares without being subject to the SEC rules that would REALLY complicate the situation, so they purchased warrants instead of common shares.

BB paid 3.99 per warrant, and they have to pay an additional .01 per warrant when they exercise them and convert to common shares. What this did was give the cash to the company as though they had sold the shares for the 4.00 offering price without BB actually owning the shares and having the voting power, which would have subjected them to the many SEC requirements that would have come from owning that many shares.

The verbiage about staying under 5% and 20% share ownership is all about avoiding the stringent SEC regulations they would be subject to if they were to own that many shares at one time.

It's all VERY GOOD for common shareholders.