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Exploring Warrant Instruments 

In the dynamic world of startup investments, convertible instruments like Advanced Subscription Agreements (ASA) and Convertible Loan Notes have become the go-to choice for both companies and investors. However, another intriguing alternative is starting to gain attention: warrant instruments. In this article, we’ll delve into warrant instruments and how they offer a distinct route to conversion.

What Are Warrant Instruments?

Warrant instruments, while sharing some similarities with convertible agreements, possess their own unique characteristics. At their core, warrant instruments provide the holder with the right to convert into shares, but they operate more like share options. Unlike traditional convertible agreements, warrant instruments don’t necessarily involve an immediate exchange of funds upon issuance. Instead, they grant the holder specific conversion rights under predefined circumstances.

Understanding the Features

The features of warrant instruments can vary but often include specifications regarding the number of shares that can be acquired and the subscription price for those shares. These instruments can be versatile tools for structuring investment deals, offering flexibility to both companies and investors.

Stapling Warrants

One intriguing trend in the investment landscape involves “stapling” warrant instruments to other financial instruments, such as convertible loan notes or even priced equity rounds. This practice can serve different purposes, depending on the situation. For investors, stapling warrants might be seen as an added benefit, potentially enhancing the overall investment. In other cases, attaching warrants to priced rounds could be a strategic move to influence the applicable price per share in favour of investors. It’s essential to note, however, that while warrants can impact the economics of a deal, they do not alter the legal price per share for conversion.