Warrants in Bond-Warrant Units: A Survey and Assessment

This Article surveys the warrant in the context of a bond-warrant unit (the typical medium of issuance), and in four main subdivisions assesses (I) the warrant’s role in corporate finance, and several major implications and features of its use today for (II) shareholders of the prospective issuer, (III) warrant holder, and (IV) issuer. The present status of the warrant as a highly significant mode of financing requires that particular attention be given to the justification for the issuance of warrants in the light of earlier authoritative criticism, and to the tax consequences and concepts now attending their use. Fortunately, several undesirable features of early warrant use are disappearing because of responsible corporate practice, but certain additional potential abuses need to be foreclosed. Arguably, too, certain concepts and conclusions in the tax area need to be reaffirmed while others should be modified or replaced.