A warrant is an option to purchase a certain number of a company's shares at a pre-determined price, within a defined time period. Warrants are frequently included in a bond issuance, so that the bond buyer acquires both the bond and its accompanying interest payments, as well as the option to profit from any increase in the company's share price. Warrants are most commonly issued when an entity is having trouble attracting investors to a bond issuance, and must sweeten the offer in order to obtain a reasonable bond price.

Warrants may also be issued to corporate outsiders as a form of compensation. This is especially common when the issuer has little cash to spare for a more traditional cash payment.

Warrants do not give their holder the right to receive dividends, and have no voting rights.

Related Courses

Corporate Finance 
Treasurer's Guidebook