Sweetener

DEFINITION of 'Sweetener'

A special feature or benefit added to a debt instrument (such as bonds) or a preferred stock offering to increase its value in the markets. Two popular forms of sweeteners are warrants and rights, which allow the holder to either convert securities into stock at a later date or purchase shares at below-market prices.

BREAKING DOWN 'Sweetener'

Sweeteners are especially useful for companies that are having a hard time attracting investors or raising capital at affordable prices. A given company may want to conduct a standard debt offering, but if there isn't enough investor appetite to sell all of the debt the sweetener can help attract enough investors to sell the entire issue. Sweeteners will always cost something extra to the company giving them away, but the exact cost may not be calculable until some date in the future.

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RELATED FAQS
  1. Why do some investors prefer convertible over “straight” bonds?

  2. Where does the stock come from when convertible bonds are converted to stock?

    First, let's define convertible bonds. A unique combination of debt and equity, they provide investors with the chance to ... Read Answer >>
  3. I own some stock warrants. How do I exercise them?

    Typically, stock warrants are derivative instruments added to new issues of stocks or bonds to make these issues more attractive. ... Read Answer >>
  4. How are stock warrants different from stock options?

    A stock option is a contract between two people that gives the holder the right, but not the obligation, to buy or sell outstanding ... Read Answer >>
  5. Are warrants traded by brokers?

    Learn about the role of investment brokers in trading warrants, both in normal stock exchanges and over-the-counter derivatives ... Read Answer >>
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    Discover the primary differences between preferred stock and corporate bonds, two income-generating investment vehicles issued ... Read Answer >>
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