Pre-Funded Warrant

A pre-funded warrant is a warrant to purchase shares for a very small exercise price because nearly all of the purchase price is paid when the warrant is issued. It is commonly used when an investor wants the economic exposure of buying shares but cannot or does not want to take immediate ownership above a contractual beneficial-ownership limit. The holder generally does not become a shareholder with respect to the underlying shares until the warrant is exercised. Once exercised, the warrant results in the issuance of shares and can contribute to the dilution of existing shareholders.