Warrants

A warrant gives the owner the right to purchase an investment (usually shares) at a specific price within a set timeframe. 

Warrants are complex instruments. 

Exercise of warrants

Warrants have an exercise price. This is the price which you must pay to convert a warrant into shares. Converting warrants into ordinary shares is known as an exercise of warrants. 

Usually, one warrant can be exercised to give one ordinary share. However, there are some exceptions where you may need to exercise several warrants to receive one ordinary share.

While some warrants can be exercised at any date, most have one or more exercise dates which are the only dates you can convert them into shares. These are usually fixed dates in each year. 

Warrants usually have a final exercise date which is the last date you can exercise the warrants. After this date, warrants are cancelled. However, you may still receive a cash payment if the warrants have a value on this date.

It is important to bear in mind the value of the warrants that will be given up when exercising them. You can usually trade warrants in the market as an alternative to exercising them.

Corporate actions

Exercising a warrant will sometimes cost more than buying the ordinary shares in the market. Companies may give warrants to current shareholders in a corporate action, with an exercise price which is higher than the current market price. They do this so that current shareholders are rewarded if the company does well in the future and the share prices rises above the exercise price.