Join us for more details : http://www.commerceconcept.in/

1. Nature of warrants

For example, Company ABC issues bonds and provides the bold buyers with warrants.  One such warrant indicates that its holder can purchase one common stock of Company ABC within three (3) years at a price of $100 per share.  The price at which common stocks can be purchased according to the warrant is called the exercise price.  Typically, the exercise price is 10-20% higher than the current market value of common stock.  Warrant holders usually have to accept somewhat lower interest rates for bonds if they receive warrants.  Warrant holders are willing to do that because they hope (anticipate) that the stock price will grow higher than the exercise price and there is will a profit opportunity.