Warrants may be used by a corporation in financial distress as a means to satisfy shareholders in the event of a reverse share split.

Question

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Warrants give shareholders the right to purchase additional shares at a predetermined price, and can be used as a form of compensation in the event of a reverse share split that reduces the number of outstanding shares. This can help satisfy shareholders who may be unhappy with the reduction in the number of shares they hold after the reverse split.

Warrants May Be Used by a Corporation in Financial Distress