1. Do these warrant dividends cost me anything? I am fairly confident the answer is NO, but please confirm.
2. Is there anything that I need to do, or will the warrant dividends magically show up in my account one day?
3. Once I get the warrants how will they appear in my (RBC) investment account. They won’t be listed on the TSX or any other exchange until the “Company Redemption Right” is exercised so I am not sure what to expect to see.
4. If the warrant dividends are not trading, what value can you ascribe to them? Just use the nominal fair market value of C$0.0001?
5. When the dividend warrants can be traded, will they be traded like a regular stock?
6. When I sell a dividend warrant in a non-registered account, are the proceeds from the sale considered a dividend, interest, or a capital gain? I guess since it is a type of dividend, I speculate it would be treated as dividend income.
7. Is this something that is good, bad, or indifferent for a CSU shareholder?
8. Is it possible to give an example of how this would work from the point of view of a CSU shareholder and the debenture holder. Assume today’s price of CSU and CSU.DB
9. Based on your experience with this type of situation if I could sell my warrants today, what price range would you speculate they are worth?
10. Have you seen this done with other companies? If yes, which ones, and how successful was it for the warrant dividend holder.
A lot of questions, but take as long as you need to answer them.
Thanks,
Paul
1) warrants are free to existing shareholders 2) Nothing needs to be done to get the warrants in an account 3) Some brokers have different policies, but they should still show up as private securities with no value until a listing is made 4) There really is no value until there is a redemption announcement $0.0001 works. 5) They should trade like any other security, if listed 6) The initial granting of warrants is not a dividend and does not have to be reported. If sold, gains would be taxable as capital gains with a cost base of zero. 7) For shareholders, it is largely indifferent, other than what they might receive for selling warrants. For shareholders who also own debentures, there is some value in eliminating the redemption possibility on the debentures. 8) If a CSU shareholder owns 1,000 shares, they get 1,000 warrants. This would also a 'swap' of $100,000 par value of Series I debentures into Series II debentures. 9) Price guessing is exceptionally difficult, We would not expect 'much' and would not expect much more than $1 or $2/warrant. If CSU debentures are $147, then a warrant extends the maturity from a possible five years (with redemption) to 17 years (to 2040 maturity). So it becomes a question of that $47 premium (which is a loss if redeemed at $100) amortized over 17 years instead of a possible five years. So it is the time value of extending the timeframe of a capital loss over a 12-year difference, essentially (assuming CSU calls for redemption right away). 10) We have not really seen something too similar. But, assuming low commission costs, the warrants are still 'free money' for anyone selling them.