Warrants have a value, and original investors can sell them on a secondary market or exchange following issuance. Once the warrants trade on an exchange, retail investors can purchase them from brokerage accounts.
Like options, the price is made up of time value and intrinsic value. Intrinsic value is the difference between the underlying share's price and the strike price of the warrant, but never less than $0. Time value is a measure of the market's uncertainty as to whether there will be any intrinsic value in the warrant when the warrant reaches the expiration date. The more intrinsic value there is and the closer the warrant's expiration is, the less uncertainty exists so there is less time value present, and vice versa.
Warrants are leveraged to the underlying stock price, so they can be very profitable if purchased at the right time. Of course, that means they can quickly fall to $0 as well. Let's go over an example.
Bank warrants issued during the Great Recession became very popular investments once the banks started to recover. One of the most popular were Bank of America (BAC -1.00%) A warrants held by the government as part of a massive bailout. The warrants sold by the U.S. Treasury Department gave investors the right to buy BofA stock for $13.30 per share by Jan. 16, 2019.
By July 2013, the price of BofA stock had already breached the strike price of the warrant, meaning every increase would be gravy for warrant holders. On Jan. 16, 2019, the last day to exercise the warrant, the price was close to double the warrant's strike price. Consequently, investors who bought the warrants when they traded in single digits made a killing on a stodgy old conservative bank stock.
The same intrinsic value relationship, time value relationship, and leverage to the underlying stock price exist in stock options, but there are differences between the two financial instruments.