Definition - What does Warrant mean?
Divestopedia explains Warrant
The choice of payment method is a key issue in mergers and acquisitions. Contingent methods of payment other than stocks can mitigate the concerns to some extent. Warrants are used to boost investor returns. Higher returns, beyond what can be achieved with interest payments alone, can be attained through appreciation of the issuing firm's equity value.
Acquiring firms prefer not to have a warrant holder acquiring equity in the acquirer. The warrant holders of the target firm can exercise their right to purchase securities within the given time frame or give up warrants. The target firms have to pay off warrant holders prior to closing while disclosing a potential merger.
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