A stock warrant gives its holder the right to buy shares at a fixed price before it expires. Warrants are most commonly issued alongside venture debt, but they can also be attached to convertible notes, SAFEs, or other financing instruments.

For example, a lender provides a $5M venture debt loan with 10% warrant coverage. If the exercise price is $10 per share, the lender receives warrants to buy 50,000 shares at $10 each before the warrants expire. If the share price later rises to $40, the lender can still buy those shares for $10 each and benefit from the difference.

Warrants compensate lenders for the higher risk of financing startups by giving them the opportunity to participate in the company's upside if it succeeds.

Qualcomm is acquiring Modular, an AI infrastructure startup, in an all-stock deal valued at approximately $3.92B. Just nine months ago, Modular raised $250M at a $1.6B valuation. Qualcomm's offer now values the company at about 2.5x its last private valuation.

Because the deal is entirely stock-based, Modular's founders, employees, and investors will receive Qualcomm shares instead of cash.

For startup shareholders, an acquisition is one of the main ways they can realize the value of their equity. In this case, their private Modular shares will be exchanged for shares in Qualcomm, a publicly traded company, giving them a path to liquidity once those shares become eligible for sale.

Source: YahooFinance | Reuters