What are Company Warrants?
Company warrants are issued by companies on their own ordinary shares to raise capital for themselves. Their value depends on the value of the ordinary share which is the underlying security.
Warrants cost a fraction of the price of their underlying security and give the buyer the right (but not the obligation) to buy the underlying security at a predetermined price (the "Strike" or "Exercise Price") on or before a predetermined date (the "Expiry" Date).
Note these products are not suitable for all investors - we require you to have passed an Appropriateness Assessment before trading.
How do Company Warrants work?
Warrants give the same economic exposure to an underlying security without actually owning it, and cost a fraction of the price of the underlying security.
At the exercise date you can choose to buy the underlying security at the pre-determined Exercise Price. At this point you will know what the actual value of the shares are. If you choose to buy the underlying security this is known as exercising the warrant (or exercising the rights attributed to that warrant).
How to get started
- You can invest in company warrants through our Trading Account or SIPP.
- Company warrants are traded like shares and are charged at normal online commission rates (see our Rates & Charges).
- To enable trading in company warrants login and go to 'account > personal details & preferences > Appropriateness Assessment Form'.
How risky are Company Warrants?
The value of your investments can go down as well as up, you may not get back all the funds that you invest.
Warrants are not suitable for everyone. You should not deal in warrants unless you understand their nature and the extent of your exposure to risk. You should have satisfied that they are suitable for you in light of your circumstances and financial position
Before trading you should fully understand the nature of warrants and your exposure to the risk involved.
The geared nature of warrants means that a relatively small movement in the share price of the underlying asset will result in larger movements in the value of the warrant. Therefore company warrants provide the opportunity for greater returns than ordinary share dealing but also greater risk of potential losses.
If there are insufficient buy orders, the market price of a warrant will be affected. There is a risk that you could not sell your warrants for a reasonable price.
A warrant may become worthless if your expectations are not realised before it's expiry.
If you are in any doubt you should consult an independent adviser.