A warrant gives a party (usually a lender or investor) the right to purchase additional shares of the company at some agreed-to price (often at a price discounted from the current price). Such warrants are often negotiated as part of a loan to “sweeten” the loan for the lender or as part of an investment round to “sweeten” the investment and help close it. Notice that a warrant gives a party more upside potential, i.e., if the company does well, the party can in effect “double down.” At the same time, warrants do not add more risk for either party.
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