Issuing a Warrant
Publicly traded companies sometimes issue warrants. A warrant holder has the right to purchase a stock in the company at a predetermined price, called an “exercise price” or a “strike price”. Warrants expire after a fixed period, which is usually 1-3 years. A warrant holder can exercise his warrant only during that period.
After that period the warrant expires. It can no longer be exercised and it becomes worthless. Consequently, the expiration date (the deadline for exercising the warrant) is very important.
A person who buys a warrant, but fails to exercise it prior to its expiration (for any reason) loses his entire investment.
Warrants neither entitle their holders to a share of a company’s profits, nor do they enable the holder to vote. A company can issue different series of warrants, which are usually numbered sequentially (1,2,3....).
The right that a warrant provides to its holder is valuable, so warrants therefore also have a cash value. Like other securities, warrants are traded on the stock exchange.