Question

Discuss the similarities and the differences between convertible debt and debt issued with stock warrants.

Answer 1

Similarites:
1) Both of them can be issued at lower cost than the general debt available
2)Both allow the holders to purchase the stock at less than market value if we assume that stock prices rises in future

Differences:
1)If there is sudden increase in stock price the issuer of conversion debt can force to convert to common stock so that it can benefit them but the issuer of stock warrant can not
2)Convertible debt are also called and comes under equity capital but the debt with stock warrant comes under debt only