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Warrant

Warrant

What is a 'Warrant'

A warrant is a derivative that confers the right, but not the obligation, to buy or sell a security – normally an equity – at a certain price before expiration. The price at which the underlying security can be bought or sold is referred to as the exercise price or strike price. An American warrant can be exercised at any time on or before the expiration date, while European warrants can only be exercised on the expiration date. Warrants that confer the right to buy a security are known as call warrants; those that confer the right to sell are known as put warrants. 

Explaining 'Warrant'

Warrants are in many ways similar to options, but a few key differences distinguish them. Warrants are generally issued by the company itself, not a third party, and they are traded over-the-counter more often than on an exchange. Investors cannot write warrants like they can options. Unlike options (with the exception of employee stock options), warrants are dilutive: when an investor exercises her warrant, she receives newly issued stock, rather than already-outstanding stock. Warrants tend to have much longer periods between issue and expiration than options, of years rather than months.

Types Of Warrants

Traditional warrants are issued in conjunction with bonds, which in turn are called warrant-linked bonds, as a kind of sweetener that allows the issuer to offer a lower coupon rate. These warrants are often detachable, meaning that they can be separated from the bond and sold on the secondary markets before expiration. A detachable warrant can also be issued in conjunction with preferred stock; often the warrant must be sold before the investor can collect dividends. 

Trading Warrants

Trading warrants can be difficult and time-consuming, as they are for the most part not listed on stock exchanges, and data on warrant issues is not readily available for free. When a warrant is listed on an exchange, its ticker symbol will often be the symbol of the company's common stock with a W added to the end. For example, Abeona Therapeutics Inc's (ABEO) warrants are listed on Nasdaq under the symbol ABEOW. In other cases, a Z will be added, or a letter denoting the specific issue (A, B, C…).


Further Reading

Stock vs. stock-warrant units: evidence from seasoned offeringsStock vs. stock-warrant units: evidence from seasoned offerings
www.sciencedirect.com [PDF]
… The findings imply that warrant financing is a useful device for signaling a firm's prospects not … As implied by the sequential financing hypothesis, firms with lower insider ownership experience a … by Ekkehart Boehmer, the reviewer for the Journal of Corporate Finance, as well as …

Wealth effects of convertible-bond and warrant-bond offerings: a meta-analysisWealth effects of convertible-bond and warrant-bond offerings: a meta-analysis
www.tandfonline.com [PDF]
… The findings imply that warrant financing is a useful device for signaling a firm's prospects not … As implied by the sequential financing hypothesis, firms with lower insider ownership experience a … by Ekkehart Boehmer, the reviewer for the Journal of Corporate Finance, as well as …

The valuation effects of warrant extensionsThe valuation effects of warrant extensions
onlinelibrary.wiley.com [PDF]
… The findings imply that warrant financing is a useful device for signaling a firm's prospects not … As implied by the sequential financing hypothesis, firms with lower insider ownership experience a … by Ekkehart Boehmer, the reviewer for the Journal of Corporate Finance, as well as …

Empirical Analysis on the Impact of Warrant Issuance [J]Empirical Analysis on the Impact of Warrant Issuance [J]
en.cnki.com.cn [PDF]
… The findings imply that warrant financing is a useful device for signaling a firm's prospects not … As implied by the sequential financing hypothesis, firms with lower insider ownership experience a … by Ekkehart Boehmer, the reviewer for the Journal of Corporate Finance, as well as …

A compare research of volatility between call-warrant and put-warrant based on GARCHmodel [J]A compare research of volatility between call-warrant and put-warrant based on GARCHmodel [J]
en.cnki.com.cn [PDF]
… The findings imply that warrant financing is a useful device for signaling a firm's prospects not … As implied by the sequential financing hypothesis, firms with lower insider ownership experience a … by Ekkehart Boehmer, the reviewer for the Journal of Corporate Finance, as well as …

Warrant Economics, Call-Put Policy Options and the Great RecessionWarrant Economics, Call-Put Policy Options and the Great Recession
openaccess.city.ac.uk [PDF]
… The findings imply that warrant financing is a useful device for signaling a firm's prospects not … As implied by the sequential financing hypothesis, firms with lower insider ownership experience a … by Ekkehart Boehmer, the reviewer for the Journal of Corporate Finance, as well as …

Study on the Value of Warrant with Variable Strike Price [J]Study on the Value of Warrant with Variable Strike Price [J]
en.cnki.com.cn [PDF]
… The findings imply that warrant financing is a useful device for signaling a firm's prospects not … As implied by the sequential financing hypothesis, firms with lower insider ownership experience a … by Ekkehart Boehmer, the reviewer for the Journal of Corporate Finance, as well as …

The Empirical Study of Pricing Warrant [J]The Empirical Study of Pricing Warrant [J]
en.cnki.com.cn [PDF]
… The findings imply that warrant financing is a useful device for signaling a firm's prospects not … As implied by the sequential financing hypothesis, firms with lower insider ownership experience a … by Ekkehart Boehmer, the reviewer for the Journal of Corporate Finance, as well as …

The risk-shifting effect and the value of a warrantThe risk-shifting effect and the value of a warrant
www.tandfonline.com [PDF]
… The findings imply that warrant financing is a useful device for signaling a firm's prospects not … As implied by the sequential financing hypothesis, firms with lower insider ownership experience a … by Ekkehart Boehmer, the reviewer for the Journal of Corporate Finance, as well as …

Stock purchase warrant and ius development in China [J]Stock purchase warrant and ius development in China [J]
en.cnki.com.cn [PDF]
… The findings imply that warrant financing is a useful device for signaling a firm's prospects not … As implied by the sequential financing hypothesis, firms with lower insider ownership experience a … by Ekkehart Boehmer, the reviewer for the Journal of Corporate Finance, as well as …


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