Warrants and convertible bonds can become stocks later?
Do not just look at the current number of shares; examine promises that could turn into shares in the future.
Table of contents
Remember this first
First, 3 things to remember
- 1A warrant is the right to purchase stock under predetermined conditions.
- 2Convertible bonds are debts that can be converted into shares depending on the conditions.
- 3Since the quantity, price, and deadline vary by company, check the original document.
The right to buy and the right to convert are different.
A warrant is the right to purchase shares at a set price. Actually using that right is called exercise. There is also a set deadline for when it can be used.
Convertible bonds are a type of debt a company has borrowed. Depending on the terms, they can be converted into stock instead of cash, which is called conversion. Having the right to convert does not mean the number of shares has increased immediately.
Check at what price and how many shares it becomes.
Let's assume there is a hypothetical right to purchase 1 share at 2 dollars. You cannot conclude that everyone will soon exercise their rights just because the market price is 3 dollars. There are also time periods and other conditions.
The table below is an example of items to check. Find the number of shares and the price in the actual contract, and record them by separating whether they are unused or already used.
| Items to find | Hypothetical conditions | In simple terms |
|---|---|---|
| Quantity | 1 right → 1 share | How many shares do you get once you use it? |
| Price | $2 | How much do you pay to receive one share? |
| Deadline | Until the date written in the contract | Until when can it be used? |
The conditions in the fine print are important.
There may be conditions where the exercise price changes or methods where you receive only a portion of the shares without paying cash. There may also be limits on the percentage one person can hold.
You do not need to do all the complex calculations from the start. First, check how many shares it can be converted into, the deadline, and whether the price is fixed; if you do not know, leave it as unconfirmed.
You should not make such assumptions
“Since the stock price is higher than the exercise price, they must have all been exercised by now, right?”
There are not only prices but also time periods and conditions. Check separate documents to see if the rights were actually exercised.
Check what you have read.
- At what price does it convert to stock?
- Until when is it possible?
- Have you separated the quantity already converted from the quantity possible in the future?
Apply what you read to the actual screen
Try it on WAPE
Source and scope of verification
Reviewed · Version 2
- Convertible SecuritiesNew window
SEC Investor.gov · Verify 2026-10-20
Definition of convertible securities · Conversion conditions and potential for dilution - Applied Therapeutics · Prospectus Supplement (2023-08-11)New window
Corporate filings / SEC EDGAR · Verify 2026-10-20
Document examples illustrating the distinction between ATM limits and actual sales · Sales conditions based on market price; not a description of the company's current status · Examples of warrant exercise price, duration, quantity, adjustments, and ownership limit conditions - Using EDGAR to Research InvestmentsNew window
SEC Investor.gov · Verify 2026-10-20
Distinction between registration documents, periodic reports, and material event disclosures · How to find and read original disclosure documents
This is educational material for observation and information comprehension. Hypothetical examples do not represent actual stocks or performance and do not provide buy or sell recommendations.