Definition of stock warrant

option to purchase a certain number of shares at a stated price for a specified time period at a subscription price that is higher than the current market price (properly called subscription warrant). A warrant may or may not come in a one-to-one ratio with the stock already owned. Unlike a put or call option, a warrant is usually good for several years; some, in fact, have no maturity date and are known as perpetual warrants. Warrants are often given as sweeteners for a bond issue (e.g., to lower the interest rate or enhance the marketability). Warrants included with a bond may also exist in a merger when the acquiring company offers cash plus warrants in exchange for voting common stock of the acquired business. Generally, warrants are detachable from the bond and have a market life of their own. Warrants pay no dividends nor do they have voting rights. The warrant enables the holder to take part indirectly in price appreciation.