What are warrants? A warrant is a specific contract that gives the holder the right to buy/sell a certain number of shares at an agreed price (strike price) on a specific date in the future (or within a specific period). Investors have the right to decide whether to perform the contract, while the issuer only has the obligation to perform. Therefore, in order to obtain this right, investors need to pay a certain price (royalty). Although the issuer receives the premium, it needs to bear the market reverse risk. Therefore, at the same time as the subscription warrant is issued, the issuer will buy a certain position of the underlying stock in the market for hedging. What the holder obtains is an exercise right rather than a responsibility, and the holder can choose to exercise it or not. The difference between warrants (actually all options) and forwards or futures is that what the holder of the former obtains is not a responsibility, but a right, while the holder of the latter is responsible for executing the terms stipulated in the purchase and sale contract between the two parties. It means trading the specified related assets at a specified price and a specified future time. From the above definition, it is easy to see that based on the direction of exercise of the rights, warrants can be divided into call warrants and put warrants. Call warrants are "call options" among options, and put warrants are "put options". Because the settlement method is different, it determines whether it is an equity instrument or a debt instrument. Rather than simply dividing them into financial assets across the board.

What role do warrants play in the split share solution? Warrants provide a new form of payment for tradability consideration. In the absence of warrants, shareholders of non-tradable shares can only pay the consideration for tradable rights with stocks or cash. The choice is relatively simple, and some stocks have a very low price-to-book ratio or a very small non-tradable share ratio. The cash flow of shareholders is not very abundant, and it is difficult to pay the consideration in stocks or cash. At this time, the shareholders of non-tradable shares can pay the consideration with the value of the warrants by issuing warrants. The value creation function of warrants can provide a means for a third party to pay consideration and reduce the cost of consideration payment for shareholders of non-tradable shares. In addition to intrinsic value, the value of warrants also has time value, and its market transaction price will include its time value part. Warrants obtained by shareholders of tradable shares can be sold and realized in the market, and the warrant purchaser pays the time value of the warrant. A third-party payment method is introduced in the consideration payment, and it also provides investors other than the original company shareholders with the opportunity to participate. Share the value-added benefit opportunities of circulation rights brought about by the shareholding reform. For shareholders of non-tradable shares who issue warrants, paying the consideration with warrants actually allows shareholders of non-tradable shares to pay the current consideration with the future value of the stock, while payment of consideration with stocks or cash can only pay the consideration with the current value. In contrast, Generally speaking, warrants reduce the consideration payment cost for shareholders of non-tradable shares and can also achieve deferred payment of consideration. The management incentive tool function of stock warrants can increase the motivation of listed companies to implement share-trading plans. Internationally, stock warrants are a very commonly used management incentive tool. The use of warrants can combine share reform and management incentives, which helps to increase the motivation of listed companies to actively participate in the share reform process.