1

warrant

noun war·rant \ ˈwȯr-ənt , ˈwär- \
Updated on: 20 Nov 2017

Definition of warrant

1 a (1) : sanction, authorization; also : evidence for or token of authorization
2 a : a commission or document giving authority to do something; especially : a writing that authorizes a person to pay or deliver to another and the other to receive money or other consideration
b : a precept or writ issued by a competent magistrate authorizing an officer to make an arrest, a seizure, or a search or to do other acts incident to the administration of justice
c : an official certificate of appointment issued to an officer of lower rank than a commissioned officer
d (1) : a short-term obligation of a governmental body (such as a municipality) issued in anticipation of revenue
(2) : an instrument issued by a corporation giving to the holder the right to purchase the stock of the corporation at a stated price either prior to a stipulated date or at any future time

warrantless

play \ˈwȯr-ənt-ləs, ˈwär-\ adjective

Examples of warrant in a Sentence

  1. The police had a warrant for his arrest.

  2. There was no warrant for such behavior.

Recent Examples of warrant from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'warrant.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Origin and Etymology of warrant

Middle English waraunt protector, warrant, from Anglo-French warant, garant, of Germanic origin; akin to Old High German werēnto guarantor, werēn to warrant; akin to Old High German wāra trust, care — more at 2very


2

warrant

verb

Definition of warrant

transitive verb
1 a : to declare or maintain with certainty : be sure that
  • I'll warrant he'll be here by noon
b : to assure (a person) of the truth of what is said
2 a : to guarantee to a person good title to and undisturbed possession of (something, such as an estate)
b : to provide a guarantee of the security of (something, such as title to property sold) usually by an express covenant in the deed of conveyance
c : to guarantee to be as represented
d : to guarantee (something, such as goods sold) especially in respect of the quality or quantity specified
3 : to guarantee security or immunity to : secure
  • I'll warrant him from drowning
  • —William Shakespeare
4 : to give warrant or sanction to : authorize
  • the law warrants this procedure
5 a : to give proof of the authenticity or truth of
b : to give assurance of the nature of or for the undertaking of : guarantee
6 : to serve as or give adequate ground or reason for
  • promising enough to warrant further consideration

Examples of warrant in a Sentence

  1. The writing was poor, but it hardly warrants that kind of insulting criticism.

  2. The punishment he received was not warranted.

Recent Examples of warrant from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'warrant.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Origin and Etymology of warrant

Middle English, waranten to act as protector, guarantee, from Anglo-French warentir, garantir, from warant


Financial Definition of WARRANT

warrant

What It Is

Warrants are securities that give the holder the right, but not the obligation, to buy a certain number of securities (usually the issuer's common stock) at a certain price before a certain time. Warrants are not the same as call options or stock purchase rights.

How It Works

Occasionally, companies offer warrants for direct sale or give them to employees as incentive, but the vast majority of warrants are "attached" to newly issued bonds or preferred stock.

For example, if Company XYZ issues bonds with warrants attached, each bondholder might get a $1,000 face-value bond and the right to purchase 100 shares of Company XYZ stock at $20 per share over the next five years. Warrants usually permit the holder to purchase common stock of the issuer, but sometimes they allow the purchaser to buy the stock or bonds of another entity (such as a subsidiary or even a third party).

The price at which a warrant holder can purchase the underlying securities is called the exercise price or strike price. The exercise price is usually higher than the market price of the stock at the time of the warrant's issuance. In our example, the exercise price is $20, which is 15% higher than what Company XYZ stock was trading at when the bonds were issued. The warrant's exercise price often rises according to a schedule as the bond matures. This schedule is set forth in the bond indenture.

One important characteristic of warrants is that they are often detachable. That is, if an investor holds a bond with attached warrants, he or she can sell the warrants and keep the bond. Warrants are traded on the major exchanges. In some cases, where warrants have been issued with preferred stock, stockholders may not receive a dividend as long as they hold the warrant as well. Thus, it is sometimes advantageous to detach and sell a warrant as soon as possible so the investor can earn dividends.

If the price of the stock is above the exercise price of the warrant, the warrant must have what is known as a minimum value. For example, consider the warrants to purchase 100 shares of Company XYZ for $20 per share anytime in the next five years. If Company XYZ shares rose to $40 during that time, the warrant holder could purchase the shares for $20 each, and immediately sell them for $40 on the open market, pocketing a profit of ($40 - $20) x 100 shares = $2,000. Thus, the minimum value of each warrant is $20.

It is important to note, however, that if the warrants still had a long time before they expired, investors might speculate that the price of Company XYZ stock could go even higher than $100 per share. This speculation, accompanied by the extra time for the stock to rise further, is why a warrant with a minimum value of $20 could easily trade above $20. But as the warrant gets closer to expiring (and the chances of the stock price rising in time to further increase profits get smaller), that premium would shrink until it equaled the minimum value of the warrant (which could be $0 if the stock price falls to below $20).

Why It Matters

Warrants are not the same as call options. Call options are not detachable and they often have a shorter shelf life than warrants do (usually less than a year, versus five or more for warrants). They are also not the same as convertible securities, where the holder uses the principal of one security to purchase another security (usually a bond issuer's stock). For example, if the Company XYZ bond were a convertible bond, the holder could trade the bond's $1,000 par value for a number of Company XYZ shares. But if the Company XYZ bond has a warrant attached, the investor must come up with additional money to purchase the shares at the exercise price (in this case 100 shares x $20 per share, or $2,000).

Warrants are also not the same as stock purchase rights. The exercise price of a stock purchase right is usually below the underlying security's market price at the time of issuance, whereas warrant exercise prices are typically 15% above market price at the time of issuance. Also, companies often issue stock purchase rights only to existing shareholders, and they also have very short lives--generally two to four weeks.

Securities with attached warrants allow their holder to participate in the price appreciation of the underlying security (Company XYZ common stock, in our example). This is because the higher the minimum value of the attached warrant, the higher the value of the bond or preferred shares. For example, the price of a Company XYZ bond with a warrant attached tends to rise as the price of Company XYZ common stock approaches the exercise price (similar to a call option).

This opportunity to participate in the upside of another security (albeit usually with the same company) gives investors a little diversification and thus is a way to mitigate risk. As a result, companies often issue bonds and preferred stock with warrants attached as a way to enhance the demand and marketability of the offering. This in turn lowers the cost of raising capital for the issuer.



WARRANT Defined for English Language Learners

warrant

noun

Definition of warrant for English Language Learners

  • law : a document issued by a court that gives the police the power to do something

  • : a reason for thinking, deciding, or doing something


warrant

verb

Definition of warrant for English Language Learners

  • : to require or deserve (something)

  • : to make a legal promise that a statement is true

  • : to give a guarantee or warranty for (a product)


WARRANT Defined for Kids

1

warrant

noun war·rant \ ˈwȯr-ənt \

Definition of warrant for Students

1 : a reason or cause for an opinion or action
  • There is no warrant for such behavior.
2 : a document giving legal power
  • “Hold that man,” … “I have a warrant for his arrest.”
  • —Richard and Florence Atwater, Mr. Popper's Penguins

2

warrant

verb

Definition of warrant for Students

warranted; warranting
1 : to be sure of or that
  • I'll warrant they know the answer.
2 : 2guarantee 1
  • The toaster is warranted for 90 days.
3 : to call for : justify
  • The report warrants careful study.

Law Dictionary

1

warrant

noun war·rant \ ˈwȯr-ənt, ˈwär- \

legal Definition of warrant

1 : warranty 2
  • an implied warrant of fitness
2 : a commission or document giving authority to do something: as
a : an order from one person (as an official) to another to pay public funds to a designated person
b : a writ issued especially by a judicial official (as a magistrate) authorizing an officer (as a sheriff) to perform a specified act required for the administration of justice
  • a warrant of arrest
  • by warrant of commitment
administrative warrant
: a warrant (as for an administrative search) issued by a judge upon application of an administrative agency
anticipatory search warrant
: a search warrant that is issued on the basis of an affidavit showing probable cause that there will be certain evidence at a specific location at a future time called also anticipatory warrant
arrest warrant
: a warrant issued to a law enforcement officer ordering the officer to arrest and bring the person named in the warrant before the court or a magistrate
Note: A criminal arrest warrant must be issued based upon probable cause. Not all arrests require an arrest warrant.
bench warrant
: a warrant issued by a judge for the arrest of a person who is in contempt of court or indicted
death warrant
: a warrant issued to a warden or other prison official to carry out a sentence of death
dispossessory warrant \ˌdis-pə-ˈze-sə-rē-\
: a warrant issued to evict someone (as a lessee) from real property used especially in Georgia
distress warrant
: a warrant ordering the distress of property and specifying which items of property are to be distrained
extradition warrant
: a warrant for the extradition of a fugitive; specifically : rendition warrant in this entry
fugitive warrant
: an arrest warrant issued in one jurisdiction for someone who is a fugitive from another jurisdiction called also fugitive from justice warrant
general warrant
: a warrant that is unconstitutional because it fails to state with sufficient particularity the place or person to be searched or things to be seized
material witness warrant
: a warrant issued for the arrest of a material witness to prevent the witness from fleeing without giving testimony
no-knock search warrant
: a search warrant allowing law enforcement officers to enter premises without prior announcement in order to prevent destruction of evidence (as illegal drugs) or harm to the officers — compare exigent circumstances
rendition warrant
: a warrant issued by an official (as a governor) in one jurisdiction (as a state) for the extradition of a fugitive in that jurisdiction to another that is requesting the extradition
search warrant
: a warrant authorizing law enforcement officers to conduct a search of a place (as a house or vehicle) or person and usually also to seize evidence called also search and seizure warrant
Note: The Fourth Amendment to the U.S. Constitution requires that a search warrant for a criminal investigation be issued only upon a showing of probable cause, as established usually by a sworn affidavit. The search warrant has to specify the premises and persons to be searched as well as what is being searched for. Not all searches require a search warrant. Warrantless searches are permitted when they are of a kind that the courts have found to be reasonable (as by being limited) or when they are prompted by a level of suspicion or belief (as reasonable suspicion or probable cause) that is consistent with the level of intrusion of the search. Some searches have been found to be so intrusive that a court hearing is required before the search is permitted.
3 a : a short-term obligation of a governmental body (as a municipality) issued in anticipation of revenue
b : an instrument issued by a corporation giving to the holder the right to purchase the capital stock of the corporation at a stated price either prior to a stipulated date or at any future time
  • stock warrant
— compare subscription

warrantless

adjective

Origin and Etymology of warrant

Anglo-French warant garant protector, guarantor, authority, authorization, of Germanic origin


2

warrant

transitive verb

legal Definition of warrant

1 : to guarantee especially by giving assurances that make one liable or responsible: as
a : to give a warranty (as of title) to
b : to protect or assure by warranty
  • the warranted goods
  • an assignor is not liable for defaults of the obligor and does not warrant his solvency
  • Restatement (Second) of Contracts
c : to state as a warranty : guarantee to be as represented
  • the seller warrants that the car is without defects
  • expressly warranted “prior endorsements guaranteed”
  • —J. J. White and R. S. Summers
2 a : to authorize by a warrant
  • a warranted search
b : to serve as or give adequate reason or authorization for
  • warranted the awarding of attorney's fees
  • was not warranted by the facts
3 : to give proof of the authenticity or truth of
  • a formally warranted statement

Origin and Etymology of warrant

Anglo-French warentir garantir, from garant protector, guarantor



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