Financial Instruments

Sir i have looked at “example 1” of your video regarding if the “B” shares are to be classified as financial liability or equity.

In your video, Lisa has a choice as to the method of redemption as follows:

Redeem the B shares for cash at their nominal value of $1
or
Issue one million of the “A” shares in settlement

The “A” shares were currently valued at $5 per share and the lowest price was $2 per share.

Question sir, in terms of deciding the choice of redemption, isn’t this done by the issuer/Lisa? Also, if Lisa had the choice of redemption, as stated in the scenario, then payment of the $1 would have been more economically feasible. However, in your video, i noticed you have evaluated the choice of redemption from the perspective of the investor and so accordingly, the share issue would be viable from this stand point.

Reason for my inquiry sir is because the BBP kit had a similar example but the choice of redemption was evaluated from the issuer’s perspective.

Please advise sir.