Stock warrant.
In plain English
A stock warrant is a certificate from a company that lets the holder buy its stock at a fixed price, the exercise price, until an expiration date that can be years out. It resembles a call option but is issued by the company itself, and exercising it creates new shares, diluting existing holders. Companies attach warrants to bonds or deals as a sweetener, and SPAC mergers often distribute them. Warrants offer leveraged upside if the stock climbs above the exercise price, but they expire worthless if it does not, so they can go to zero even when you were partly right.
01Why it matters
Warrants offer leveraged upside but can expire worthless, and exercising them dilutes shareholders, so understanding them clarifies a risk that often rides along with SPAC and deal investments.
02The math, step by step
You hold a warrant to buy a stock at 11.50 dollars, expiring in three years. If the stock rises to 18 dollars you profit by exercising; if it never passes 11.50 before expiration, the warrant expires worthless.
03What this is NOT
A warrant is NOT the same as a call option. A warrant is issued by the company and creates new, dilutive shares when exercised, whereas an option is a contract between investors and does not issue new stock.
04Receipts
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