SPAC warrants: what they are, what they are worth, and when they are not

Every SPAC unit carries a fraction of a warrant. It is the sweetener that got the offering sold, and it behaves nothing like the share it came bundled with.

The standard terms

• Exercise price of $11.50, in almost every deal.
• Exercisable 30 days after a business combination closes, and not before.
• Expiry five years after closing.
• Redeemable by the company once the shares sustain a threshold, commonly $18.00 for 20 trading days out of 30.
• No claim whatsoever on the trust account.

What that structure means

A warrant is a bet that a deal closes and that the resulting company trades meaningfully above $11.50. Both halves have to happen. If the vehicle liquidates, the warrant expires worthless even though the shareholder next to you got their money back in full.

The redemption threshold caps the upside. Once the shares hold above the trigger, the company can force conversion, which in practice puts a ceiling on what the warrant can be worth as an option.

Why coverage tells you about the offering

Coverage of one half means one whole warrant per two units. In a strong market sponsors have priced deals with a quarter, a fifth, or no warrant at all. In a weak one they have given away a full warrant per unit.

So coverage is a readable signal about demand at pricing. A thin coverage deal was easy to sell; a full warrant deal was not.

The dilution nobody counts

Warrants are deferred dilution. They cost the holder nothing until exercise, and they sit outside the share count in every headline valuation until they arrive in it. On a deal where a large warrant block ends up in the money, the effect on the combined company's share count is material and predictable, and it is disclosed in the S-4 for anyone who reads that far.