Warrants
Definition
Warrants: Warrants are financial instruments that give the holder the right to purchase company stock at a specified price (exercise price) before an expiration date. Unlike stock options given to employees, warrants are typically issued to investors, lenders, or strategic partners as additional compensation. Warrants dilute existing shareholders when exercised.
Example Usage
“The venture debt included warrants for 1% of the company at a $20M valuation, exercisable for 10 years.”
Common Misconceptions
Related Terms
Stock Options
Stock options give employees the right to purchase company shares at a fixed price (strike price) after vesting. Options are a common form of equity c...
Dilution
Dilution occurs when a company issues new shares, reducing existing shareholders' ownership percentage. In each funding round, founders and early inve...
Venture Capital
Venture capital is a form of private equity financing provided by firms (VCs) to startups with high growth potential. VCs raise funds from limited par...
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