THE WOOF OF WALL STREET

[srm4u]

What are Stock Warrants?
Stock warrants are options issued by a company that trade on an exchange and give investors the right (but not obligation) to purchase company stock at a specific price within a specified time period. When an investor exercises a warrant, they purchase the stock, and the proceeds are a source of capital for the company. However, a warrant does not mean the actual ownership of the stocks but rather the right to purchase the company shares at a particular price in the future. Warrants are not popular in the United States, but they are common in other countries such as China.

Why are Stock Warrants Issued?
A company may issue a warrant to attract more investors for an offered bond or stock. As a result, the company may obtain better terms on the bond or stock offering. For example, when the company shares trade at $100 each, and the warrants are $10 each, more investors will exercise the right of a warrant, even if they lack enough capital to buy the stocks. The warrant represents a potential source of capital in the future when the company needs to raise additional capital without offering other bonds or stock.

Further, companies can issue warrants as a capitalization option when heading to bankruptcy. Issuing warrants provides the company with a future source of capital. Also, a warrant may be issued as a way of preserving goodwill from the company’s shareholders. It will be more easy to convince shareholders to pay $10 per warrant than to purchase additional company shares at $100. However, warrants should be used carefully due to the quick gains or losses that they create.
https://corporatefinanceinstitute.com/resources/knowledge/finance/stock-warrants/