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Warrant Coverage

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Warrant Coverage
A situation in which a company attaches to its stock a percentage of the dollar amount of one's investment in the form of more shares. For example, a person who buys 100 shares at $X per share may receive warrant coverage for a 10%of X, which allows the investor, if he/she desires, to buy 10 more shares at $X. A company may issue warrant coverage as a form of preemptive dilution protection: if it intends to issue more shares, it may issue warrant coverage to existing investors to protect their percentages of ownership up to a certain amount. It does not protect investors from downtrends in the stock, but does protect them from missing out on uptrends. See also: Cum warrant.


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