Stock warrant definition
/What is a Stock Warrant?
A stock warrant gives its holder the right, but not the obligation, to purchase a certain number of a company's shares at a pre-determined price, within a defined time period. When a warrant is exercised, the warrant holder pays a fixed price to the issuing company, which issues the shares directly to the warrant holder. Warrants do not give their holder the right to receive dividends, and have no voting rights.
How Stock Warrants are Used
Warrants are sometimes 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 stock 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.