Will the terms of a warrant or CBBC be adjusted when there is a capital adjustment of the underlying asset?

Under normal circumstances, a warrant or CBBC linked to shares of a company will be adjusted if there is a capital adjustment of those underlying stocks (such as bonus issue, rights issue and restructuring event or spin-off / merger / consolidation). Specifically, an adjustment will be made to the call price, strike price and entitlement ratio according to terms specified in the relevant listing documents.

In the case of a merger/consolidation, an adjustment will be made to the call price, strike price and entitlement ratio of the warrant or CBBC of the company being merged or consolidated with. If the merger/consolidation results in an extinguishment of the current underlying, such underlying of the warrant or CBBC will change from the original underlying to a surviving/new underlying. Where there is a surviving company, no adjustment will be made to the warrant or CBBC of the surviving company.

Where the Effective Date of the adjustment occurs after the ex-entitlement date of the underlying stocks (such as in the case of spin-off), no adjustment will be made to those warrants or CBBCs that expire in the interim period.