warrant

Definition

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.

Use warrant in a sentence

You may want to ask for a warrant so that you know you are getting exactly what you bargained for.

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Warrant 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. Warrants are often included in a new debt issue as a "sweetener" to entice investors.

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When my bank agreed to invest a large sum in the steel manufacturer, it did so on the condition that it receive bonds from the company and a warrant to buy 10% of the company at a later date.

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exercise unit