Creative Financing Using Convertible Securities And Warrants

Presented by: Josh Schaeffer, PhD

Convertible securities are tools which combine features of debt and equity financing, and include convertible debt, convertible preferred stock, and warrants. They help companies raise capital while minimizing debt servicing outlays.

Convertible securities appeal to high-growth firms, firms with low credit ratings, as well as any firms looking to save on interest expense from financing. Stock warrants are a valuable capital raising tool, and are also often used in negotiating intercompany agreements, including mergers, acquisitions, and joint ventures.

The catch? They’re tricky to value and can lead to complicated accounting treatment.

We’ll discuss:

  • The landscape of financing instruments outside of pure debt and equity
  • Ways that convertibles and warrants can impact financing activities
  • How the use of complex securities differs between mature and early stage companies
  • Techniques for estimating the fair value of convertibles and warrants
  • Idiosyncratic features that can lead to accounting surprises
  • How to prepare and plan pre-issuance to optimize the deal terms

Learn ways to manage the risks and benefits of these complex securities.


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