A stock warrant is a financial instrument that gives the holder the right, but not the obligation, to buy a specific number of shares of a company's stock at a predetermined price within a specified time frame. Warrants are often issued by companies as a way to raise capital or sweeten a debt or equity offering. They are similar to stock options in that they provide the holder with the opportunity to purchase shares at a predetermined price, known as the exercise price or strike price.
Exercise Price is the price at which the warrant holder can buy the underlying stock. It is predetermined at the time of issuance and does not change over the life of the warrant. Warrants have a specific expiration date, after which they become worthless. The holder must exercise the warrant before this date if they wish to buy the underlying stock at the predetermined price.Warrants are typically linked to a specific number of shares of a company’s common stock. The number of shares is specified when the warrant is issued. The company that issues the warrants is the one whose stock the warrant allows the holder to purchase. Companies may issue warrants as part of a financing strategy or to attract investors.This refers to the period during which the warrant can be exercised. Warrants can have varying terms, ranging from a few months to several years.Some warrants are traded on the stock exchange, allowing investors to buy and sell them in the secondary market. Others may not be traded and can only be exercised with the issuing company. Warrants provide leverage because the initial investment required to buy the warrants is typically lower than the cost of buying the equivalent number of shares at the current market price. However, this leverage comes with risks, as the value of warrants can be more volatile. When warrants are exercised, new shares are issued, which can lead to dilution for existing shareholders. This is a consideration for both the issuing company and current shareholders
