Warrant

In corporate equity financing, an issuer-granted right, not an obligation, to subscribe for shares at an agreed exercise price during a specified period. A warrant may accompany financing as an equity incentive; it is not limited to junior debt.

Warrant in round numbers

Hypothetical: a warrant permits subscription for 1,000 shares at US$10 each. If it is exercisable under its terms when the shares are valued at US$20 each, exercise costs US$10,000 and the shares have a value of US$20,000. The US$10,000 difference is intrinsic value before the original warrant cost, taxes and fees—not a full fair-value estimate or guaranteed liquid profit.

Source: HMRC: corporate warrants and subscription rights.

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