What is the Difference between Warrants and Options? Which should you give to employees?

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In this short video, we are talking about the difference between warrants and options. This is another common misconception and I'm hoping to clarify it once for all.
You've probably heard of getting stock options just like you might be familiar with buying an option or selling an option on a house.
You might also be familiar with getting warrants in a company related to compensation or as a bonus when doing a private investment.
They seem the same so what's the difference?
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Опубликовано:

14 окт 2024

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Комментарии : 14

@dmullins301TWM 3 месяца назад

There is no vid length minimum required to provide an epiphany. This vid did so in just a couple of minutes. Well done.

@daniellango3668 3 года назад

OMG FINALLY SOMEONE. THANK YOU!!!!!!

@makshade6846 4 месяца назад

What are the “various consequences”?

@mustardchef1031 Год назад

Great video. I got the impression that this was the difference while reading "Venture Deals" (Feld/Mendelson) and this is the first place I found that confirmed that suspicion. Cheers!

@OffshoreCitizen Год назад

Glad it was helpful!

@hiramgonzalez8693 Год назад

Great video. Simple and easy to understand!

@OffshoreCitizen Год назад

Happy to be of service :) Anything you'd like to see next?

@onetry7406 3 года назад

I'm having trouble imagining where the value lies in receiving a warrant as a performance incentive. If it's a new share doesn't that just mean it's issuance has diluted the value of the previously existing shares? How is that used as an incentive?

@MichaelRosmer 3 года назад

It does dilute other shares but it's still of value especially if the company is growing fast. Consider for instance that you're earning $100k/yr as a, salary plus you get 100 warrants a year in Tesla stock. Those warrants start the year being worth $100 each bit the price of shares goes up 5x in the year like this year. Now, first it was already $10k in value but now it is $50k. Granted the dilution will decrease the earnings per share by a slight bit depending on the previous number of shares but usually it's highly marginal.

@patrickwerz4608 2 года назад

Hi, if a tech startup gives me a wararnt with an underlying share value of e.g. 4k $. What does this imply? Can I buy shares after IPO for 4k $. That doesn't sound like a huge benefit, or am I missing something? Is there a value leverage I don't see? Thanks, in advance

@MrKILLUMINAT1 3 года назад

I've seen your videos (which are great) and I think you said you were from Canada before. I was wondering, why do they allow covered calls (selling calls on shares that you own) but don't allow selling cash secured puts (selling puts with cash ready if assigned) on a TFSA?

@OffshoreCitizen 3 года назад

Thanks for the compliment! It's a great question and I'm not sure it's entirely rational. As I understand the basic concept behind a TFSA they don't want it to protect active income and as a, result what would be considered active trading tends not to be allowed whereas passive strategies are ok. Of course regulators aren't traders or even good investors so I'd imagine they somehow categorised convered calls as passive but cash secured puts as a more active strategy.