IOICorp-CD will be the first European-style CW to be traded on the Bursa as compared to the existing American-style CWs currently available. The difference between these 2 types of CWs is that the American-style CWs allow the holder to exercise the conversion option at anytime he/she chooses (up to the expiry date), while a holder of an European-style CW can only exercise the conversion option on the expiry date.
Some may feel that the flexibility afforded by an American-style CW makes it somewhat superior to an European-style CW. This flexibility may come in handy when the CW somehow trades at a discount, not an uncommon phenomena on the Bursa. In theory, that should not happen. The value of a CW is made up of 2 parts; the intrinsic value (the underlying share price less the exercise price) as well as the time value (the difference between the CW price & the intrinsic value). By converting a CW before its expiry date, the holder is destroying the time value portion of a CW. As such, issuers of European Style CWs argue that the additional flexibility granted by an American Style CW is superfluous.
Notwithstanding the above, we can see from the table below that the new CW has a higher premium than the existing 2 CWs. As such, I believe the upside of this CW will be quite limited.
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