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Finance Dictionary and Glossary of Investment Terms
warrant
Definition 1.
A certificate, usually issued along with a bond or preferred stock, entitling the holder to buy a specific amount of securities at a specific price, usually above the current market price at the time of issuance, for an extended period, anywhere from a few years to forever. In the case that the price of the security rises to above that of the warrant's exercise price, then the investor can buy the security at the warrant's exercise price and resell it for a profit. Otherwise, the warrant will simply expire or remain unused. Warrants are listed on options exchanges and trade independently of the security with which it was issued. also called subscription warrant.
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Definition 2.
A security that allows the owner to buy a predetermined number of shares of a stock -- generally at a higher price -- at some point in the future. For example, you might buy a warrant that gives you the right to purchase 10 shares of XYZ stock at $50 per share at any time before Jan 1, 2004. Warrants are generally offered in tandem with a fixed-income security to provide additional incentive to the buyer.
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Definition 3.
A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market price. Warrants are traded as securities whose price reflects the value of the underlying stock. Corporations often bundle warrants with another class of security to enhance the marketability of the other class. Warrants are like call options, but with much longer time spans-sometimes years. And, warrants are offered by corporations, while exchange-traded call options are not issued by firms.
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Definition 4.
A certificate issued by a company giving the holder the right to purchase securities at a stipulated price within specific time limits or with no expiration date (perpetual warrant). A warrant is sometimes offered by a company as an inducement to buy.
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Definition 5.
A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame.
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