What is a Warrant? - Definition from Divestopedia (2024)

FAQs

What is the definition of warrant? ›

: a precept or writ issued by a competent magistrate authorizing an officer to make an arrest, a seizure, or a search or to do other acts incident to the administration of justice.

If it's a merger for shares, the warrants will be adjusted to reflect the share terms of the merger and will continue to trade. If it's a cash buyout then warrant expiration is accelerated and the warrant will be worth its intrinsic value if in-the-money and worthless if out-of-the-money.

Warrant Holder means any Person who acquires Warrants or Warrant Stock pursuant to the provisions of the Purchase Agreement or any Warrant, including any transferees of Warrants or Warrant Stock.

A stock warrant is a derivative contract between a public company and an investor. A warrant gives the holder the right to buy or sell shares of stock to or from the issuing public company at a specified price before a specified date. Holders of warrants are under no obligation to buy or sell the underlying stocks.

Warrants normally issued by a court include search warrants, arrest warrants, and execution warrants.

The warrant is the assumption on which the claim and the evidence depend. Another way of saying this would be that the warrant explains why the data support the claim.

Buyouts occur when a buyer acquires more than 50% of the company, leading to a change of control. Firms that specialize in funding and facilitating buyouts, act alone or together on deals, and are usually financed by institutional investors, wealthy individuals, or loans.

When you're in business with one or more partners, and all of you collectively determine to refuse an offer to buy out your company, you have no problem. Your partnership is a single legal unit and you're all in agreement. The situation can become stickier when most partners want to sell, but one refuses.

If the deal is an all-cash deal, all the shares of the stock will be removed from the portfolio at a point based on the deal's final date and this will be exactly replenished by the cash value of the shares that are mentioned in the buyout.

The idea is that you purchase a warrant when you anticipate the value of a stock to rise above the set price within the time the warrant can be used. If that happens, you buy shares of stock — known as exercising a warrant — below market price and collect the extra value as a gain.

Do warrants have ownership? ›

However, the warrant does not represent immediate ownership of the stock, only the right to purchase the company shares at a particular price in the future. Warrants are not extensively used in the United States, but they are more common in China.

Companies typically issue warrants to raise capital and encourage investors to buy stock in their firms. They receive funds when they sell the warrants and again when stocks are purchased using the warrant.

The expiration date is the date on which the stock warrant expires. Once a stock warrant expires, it is no longer valid, and the holder loses the right to buy or sell the underlying stock at the exercise price.

Disadvantages of Warrants

Fall to zero – the value of warrants can fall to zero once exercised, which can lead to the loss equivalent to the entire investment value. No control rights – warrant holders do not receive control rights that shareholders have.

Also, warrants have time value. The longer a warrant has before it expires, the greater its value will be. That's because the further away the expiration date is, the more time the underlying stock has to rise in value.

Warrants are issued by companies, giving the holder the right but not the obligation to buy a security at a particular price. Companies often include warrants as part of share offerings to entice investors into buying the new security.

Arrest warrants serve the purpose of protecting people from unlawful arrests under the Fourth Amendment. The warrant also gives an actual notice to the person or persons being arrested about the charges pressed against them. An arrest warrant is preferred, but not required, to make a lawful arrest.

Stock exchanges set the terms and conditions for call options. For warrants, the issuing company decides the terms and conditions for purchase. With call options, underlying assets are generally bonds, equities, commodities or indices. In the case of warrants, underlying assets are usually stocks and currencies.

Synonyms of warrants (noun authorization) sanction. license. certificate. permission.