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Massive growth in issue of stock purchase warrants by Canadian companies

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Computershare Trust Company of Canada has revealed data that show a dramatic increase in the number of stock purchase warrants it issued on behalf of Canadian companies over the course of the last year.

Warrants give the holder the right to purchase a company’s stock at a specific price in the future by a particular date. Computershare issues warrants on behalf of its clients directly to investors as a means to raise capital and encourage stock purchase.

Computershare says that it helped companies issue 141% more warrants between July 2020 and June 2021 than during the previous 12 months (366 compared to 152).

“There has been a far greater appetite among Canadian companies to raise capital by issuing warrants over the last year, especially small to medium-sized companies that are focused on growth, whether via acquisitions, the development of their products or entry into a new market,” said Toni De Luca, Senior Vice President, Computershare Trust Company of Canada.

De Luca said she last saw increased demand for warrants during 2017 and 2018, largely as a result of a desire among companies to take advantage of opportunities in emerging and high‑growth markets, including bitcoin, small mining, and oil and gas.

However, the significant growth in volume over the last year has been far greater, and is likely related in part to the pandemic, with more companies seeking equity during uncertain times.

Warrants Chart

The increase in the number of warrants issued by Computershare on behalf of its clients in 2017 and 2018 came at the same time as economic growth in Canada, with volumes subsequently decreasing as the pace of economic growth slowed in 2019.

Majority of warrants issued by companies in British Columbia

Computershare’s data also show that a large proportion of warrants were issued on behalf of small to mid-sized companies across all provinces, with the majority of companies (60%) based in British Columbia.

Computershare Trust Company of Canada acts as the warrant agent for a wide range of companies as they raise capital. Computershare helps companies manage their securities registers, facilitate transfers and exercises as well as issue underlying shares.

With decades of experience working with issuers and investors globally, Computershare Trust Company of Canada provides a wide variety of corporate trust solutions for client needs in corporate finance, debt issuance and mergers and acquisitions (M&A).

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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