Essentially, stock markets allow you to enter the share market without actually buying shares. This can be an attractive feature for a start-up that’s just beginning to get their gears going, but investors may be somewhat stand-offish about this arrangement.
Let’s take break it down.
- If you’re looking for capital appreciation rather than income, then stock warrants may be a solution. It’s a cheap option to purchasing stock and it allows investors the opportunity to obtain shares when there isn’t actually any capital.
- Stock warrants have better liquidity.
- Stock warrants generally offer more of a percentage gain than if the stock was purchased outright.
- Stock warrants expire, and they could be worthless if no capital gain has been achieved during that time period.
- When the price of stock warrants change, someone is going to be out some money (either the buyer or seller).
- No dividends apply to stock warrants. You could lose out on hefty dividends if you opt for stock warrants instead of regular stock.
Generally speaking, stock warrants are fine if you are sure of capital gain the near future. It could prove to be more risky in other situations. It would be best to consult a business attorney to help you understand the better stock option for your situation.
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