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This paper examines 249 privately-placed bonds with warrants (BWs) where the related parties including largest shareholders purchase warrants from financial institutions. The major findings of this paper are as follows. First, the announcement effect is significantly negative. Second, the average return of exercising warrants is 1,441%. Out of this return, 674% is attributable to the refixing option. Third, the largest shareholders are able to select the best exercise timing due to information advantage. The cumulative abnormal return of 100 days prior to the exercise date is 29.32%. Fourth, the market reacts negatively when warrants are exercised. Korea is the only country where privately-placed BWs are issued with the refixing option. This paper presents evidence that warrant returns are extremely high due to the refixing option, thus we make a feasible recommendation that the benefit of the option is reduced or a different refixing range of the exercise price is applied in public or private placements.

Using a sample of 1,421 convertible bond (CB) issuances announced between 2015 and 2018, this study examines the announcement effects of convertible bond issuances and refixing conversion prices (i.e., adjusting conversion price downward if stock price decreases after issuance). The major results are as follows: First, the announcement effect of CB issuances is significantly positive and the three-day cumulative abnormal return is 4.66%. Second, the announcement effect of CB issuances stating capital expenditures as the use of proceeds is significantly smaller than that of CB issuances stating other purposes. Third, the fact that the announcement effect of CB issuances with a refixing option is significantly smaller than that of those without a refixing option reflects the stock market’s negative opinion of the refixing option. Fourth, consistent with the third result, the announcement effect of refixing is also significantly negative. To summarize, this study contributes to finance theory by presenting, for the first time, evidence to support the negative effects of refixing options that are extremely favorable to holders.

This study analyzes investors' trading patterns, and investment and arbitrage opportunities by examining the trading data of preemptive right certificates, which are issued from seasoned right offerings. The major findings of this paper are as follows: First, investors can earn 9.70% returns over approximately a one month period (annualized return of 95.69%) by selling stocks short and purchasing certificates. This stock-certificate arbitrage suggests that certificates are undervalued in the market. Second, during the certificate trading period, institutional investors show a selling trading imbalance whereas personal investors show a buying trading imbalance, compared to past trading patterns. Third, existing investors earn the same returns either by selling certificates or by participating in right offerings. Overall, the listing of preemptive right certificate makes the market more efficient not only by protecting minor shareholders' wealth but also by providing new investment and arbitrage opportunities.