Warrants and rights

You might invest in stocks for years or even decades without receiving a warrant or right, but they are two very interesting types of securities that can come about from owning stocks or other securities.

What is a Warrant?

A warrant is a derivative security that gives a holder the right to purchase a security (usually shares of stock) from the issuer at a specific price within a certain time frame.

Warrants are most often included in a new security issue in an attempt to entice investors to purchase more shares. However, after being issued they can also be traded on an exchange.

1. The issuer:

   Warrants are issued and guaranteed by the company itself, while options are an investment product issued by an exchange and not the company.

2. Lifetime (how long until they expire):

   The lifetime of a warrant is often measured in years, while the lifetime of an option is much shorter - typically months or weeks.

To distinguish warrants from the other securities on a stock exchange, just look for .WT in the ticker symbol - that will show you the warrants for that particular symbol.

What is a Right?

A right (also known as a rights offering) is an invitation to shareholders to purchase additional new shares in the company.

This security allows existing shareholders to buy newly issued shares in proportion to their existing shares (sometimes at a discount price to the current market price) before a stated date in the future (the expiry date). If you receive a right and choose not to exercise it, the right will expire worthless. 

To help distinguish rights from stocks on a stock exchange, a right will typically have .RT included in the ticker symbol. However, within your account, rights offerings can sometimes show up as a code issued by the specific company.

Rights vs. Warrants - What’s the difference between them? 

The biggest difference between rights and warrants is their lifespan. Rights will typically expire after a few weeks or months, while warrants can continue from one to several years.

Many rights and warrants are listed for trading, but some are non-transferable, meaning that they cannot be traded (those typically have WTS in front of their name).

If you exercise your rights or warrants you will receive the underlying security as outlined in the agreement for the warrant or right.

How can I determine the expiry date and exercise price for my Warrants or Rights?

The best place to go for information regarding the expiry date and exercise price for a warrant or right is the Investor Relations page of the specific issuer.

If they don’t have that information publicly posted, they should have contact information for their Investor Relations team who can also assist you.

How do I exercise my Warrants or Rights?

There is no charge to exercise warrants or rights at Questrade.

To exercise your warrants or rights, you need to place a corporate action request in myQuestrade > Requests > Corporate Actions.

Due to the time required to process requests like this, you must send us your request to exercise a warrant or right at least three business days (72 hours) before the deadline set by the Canadian Depository for Securities.