Expert: Paul Henneman - 3/29/2004

Question
I've bought DCTH stock 3.5 years ago.  Some time after I bought, I was issued warrants.  I never bought the warrants but an equal amount of DCTHW shares appears on my portfolio.  Why is this? What exactly is a warrant and how should I determine what to do with them? What should I have done when these were issued?

Thank you,

Dirk

Answer
Dirk,
  Thank you for your question!
  Warrants are sometimes offered when you purchase actual shares as an incentive to make the purchase. I've included the definition of 'Subscription Warrant' from Barron's Dictionary of Financial Terms as they describe this better than I could (p. 607):

"type of security, usually issued with a bond or preferred stock, that entitles the holder to buy a proportionate amount of common stock at a specified price, usually higher than the market price at the time of issuance, for a period of years or perpetuity; better know simply as a warrant.... A warrant is usually issued as a sweetner, to enhance the marketability of the accompanying fixed income securities. Warrants are freely transferable and are traded on the major exchanges."

The question then becomes when your warrants expired or if they are still good. The second thing is then what price does the warrant allow you to purchase the additional shares at? Is this price lower than what the stock is trading at today? I don't believe that you needed to do anything when they were issued. You now just need to check if they are still available, and if the stock is at a favorable price to execute the warrant.
I hope this helps! PLease do not hesitate to follow up with me if I can be of any additional  assistance,

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
(800) 381-5576