A warrant is a derivative instrument issued directly by a company (unlike exchange-traded options, which are issued by exchanges). It gives the holder the right — but not the obligation — to buy a specific number of the company's ordinary shares at a predetermined exercise price (the "strike price") at any point before the warrant expires.
Warrants are typically issued as sweeteners alongside rights issues or debenture offers to make the primary instrument more attractive. They trade separately on the CSE after issuance, with their price moving based on the relationship between the underlying share price and the strike price, time to expiry, and volatility.
When the underlying share price rises significantly above the strike price, the warrant is said to be "in the money" and has intrinsic value. If the share price is below the strike price, the warrant is "out of the money" and will typically have only time value.
Warrant holders must exercise or sell before the expiry date, or the warrant lapses worthless. This time decay element makes warrants more complex than direct share ownership and requires careful monitoring.