Share Certificate vs. Share Warrant: What's the Difference?
Edited by Janet White || By Harlon Moss || Updated on October 25, 2023
A share certificate is evidence of share ownership, while a share warrant allows the bearer to acquire shares.
Key Differences
Share certificates and share warrants are integral parts of the financial and stock market world. A share certificate serves as a testament to the ownership of shares in a company. When an investor buys shares, they receive a share certificate as proof of their investment. It specifies the number of shares owned, the date of purchase, and other relevant details.
In contrast, a share warrant is an instrument that grants the holder the right, but not the obligation, to acquire shares of a company at a specified price within a set period. Share warrants can be sold, and their value can fluctuate based on market conditions. They offer potential for future share ownership, unlike share certificates, which confirm existing ownership.
The way these two instruments function within the market also varies. While the share certificate remains a constant proof of share ownership as long as the shares are held, the share warrant's worth can change over time as it is influenced by factors like market volatility, the underlying share's price, and time left for the warrant's expiration.
Another distinction between the two is transferability. Share certificates often require a formal transfer process when changing ownership, complete with documentation. Share warrants, being bearer instruments, are often more easily transferable since possession can equate to ownership.
From a corporate perspective, issuing share certificates doesn't change the company's capital. In contrast, when share warrants are exercised, they can result in an increase in the company's shares and thereby possibly diluting existing shareholdings.
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Comparison Chart
Primary Purpose
Proof of share ownership
Right to acquire shares in the future
Market Behavior
Remains constant as proof of ownership
Value can fluctuate based on market conditions
Transferability
Requires formal transfer and documentation
Easily transferable as a bearer instrument
Effect on Company's Capital
No change upon issuance
Can result in an increase when exercised
Nature
Represents existing ownership
Offers potential future ownership
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Share Certificate and Share Warrant Definitions
Share Certificate
Document showing details like number of shares and date of purchase.
The share certificate indicated a purchase date of January 15th.
Share Warrant
A tool that can fluctuate in market value.
Due to market conditions, Lucy's share warrant increased in value.
Share Certificate
A document evidencing ownership of shares.
After buying shares, Jane received her share certificate by mail.
Share Warrant
Document offering potential future share ownership.
With his share warrant, Ron could acquire shares within the next year.
Share Certificate
Physical or electronic proof of investment.
The bank kept a copy of Lisa's share certificate for her loan application.
Share Warrant
Can lead to an increase in company's shares when exercised.
The company issued more shares when several share warrants were exercised.
Share Certificate
Formal confirmation of shareholding.
Before selling, Peter had to present his share certificate to the broker.
Share Warrant
Not an obligation, but an option to buy shares.
Although she had a share warrant, Mary decided not to buy more shares.
Share Certificate
Proof of stake in a company.
The share certificate showed Mark owned 500 shares.
Share Warrant
A bearer instrument granting rights to buy shares.
The share warrant gave Tom the option to buy shares at $50 each.
FAQs
What does a share certificate represent?
A share certificate is a proof of share ownership in a company.
Is a share certificate transferable?
Yes, but it often requires a formal transfer process and documentation.
What does a share warrant allow?
A share warrant grants the holder the right to acquire shares at a predetermined price.
Can a share warrant's value change over time?
Yes, a share warrant's value can fluctuate based on market conditions.
Does issuing share certificates change a company's total shares?
No, issuing share certificates doesn't change the company's total shares.
Can share warrants be sold?
Yes, share warrants can be sold and their value can change based on market conditions.
Is a share warrant an obligation to buy shares?
No, it's an option, not an obligation.
Do both share certificates and share warrants represent ownership?
Share certificates represent current ownership, while share warrants offer potential future ownership.
What happens if a share warrant is not exercised?
It expires and becomes worthless.
How does one obtain a share certificate?
It's typically issued by the company or its registrar after shares are purchased.
Is owning a share warrant the same as owning shares?
No, a share warrant offers the right to acquire shares, not current ownership.
Do share certificates have an expiration?
No, share certificates represent ownership as long as shares are held.
Can share warrants be issued in electronic form?
Yes, like many financial instruments, they can be issued electronically.
Can one buy shares without a share certificate?
Share certificates are proof of ownership, but modern electronic systems often track ownership without physical certificates.
Are share certificates and share warrants securities?
Yes, both are types of securities related to share ownership.
Are share warrants always exercised?
No, they give the right, but not the obligation, to acquire shares.
What details are typically found on a share certificate?
Details like number of shares, date of purchase, and shareholder's name.
Can a company refuse to honor a share warrant?
If issued legitimately, companies are typically bound to honor them unless specific conditions aren't met.
Are share certificates always physical documents?
No, they can be issued electronically as well.
How does exercising share warrants impact a company?
It can increase the company's shares and possibly dilute existing shareholdings.
About Author
Written by
Harlon MossHarlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
Edited by
Janet WhiteJanet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.
