What is a stock warrant? How do warrants work?
In general, a warrant is a security issued by a company allowing the holder to purchase a certain number of a particular class of shares at a certain price for a particular period of time.  They differ from exchange traded options (i.e. calls and puts) in that they are issued by the company that issued the underlying shares that they allow you to purchase whereas calls and puts are generally written by other investors. The other big difference between options and warrants is that options are standardized.  Any call or put you buy on a particular exchange has basically the same set of rules governing use.  By contrast, a warrant may have all kinds of stipulations that must occur before you can execute, such as price events (e.g. only if the stock hits a certain price) or business events (e.g. only if the company elects to defer payment on a bond issued at the same time as the warrant). Warrants are generally a bad choice for small and inexperienced investors since each warrant issue is different and you often need a lawyer or other qualified professional to fully understand all to possible outcomes. In Australia there are 2 type of warrants (I don't know if it is the same in the US, UK and other countries), the first are trading warrants and the second are instalment warrants. The trading warrants are exactly what it says, they are used for trading. They are similar to option and have calls and puts. As Cameron says, they differ from exchange traded options in that they are issued by the financial companies whereas options are generally written by other investors. Instalment warrants on the other hand are usually bought and sold by investors with a longer term view. There are no calls and puts and you can just go long with them. They are also issued by financial companies, and how they work is best explained through an example: if I was to buy a stock directly say I would be paying $50 per share, however an instalment warrant in the underlying stock may be offered for $27 per warrant. I could buy the warrant directly from the company when it is issued or on the secondary market just like shares. I would pay the $27 per warrant upfront, and then in 2 years time when the warrant expires I have the choice to purchase the underlying stock for the strike price of say $28, roll over to a new issue of warrants, sell it back on the secondary market, or let it expire, in which case I would receive any intrinsic value left in the warrant. You would have noticed that the warrant purchase price plus the strike price adds up to more than the share price ($55 compared to $50). This is the interest component inherent in the warrant which covers the borrowing costs until expiry, when you pay the second portion (the strike price) and receive the underlying shares. Another difference between Instalment warrants and trading warrants (and options) is that with instalment warrants you still get the full dividends just like the shares, but at a higher yield than the shares.
Imagine you have a bank account with $100 in it. You are thinking about selling this bank account, so ask for some bids on what it's worth. You get quotes of around $100. You decide to sell it, but before you do, you take $50 out of it to have in cash. Would you expect the market to still pay $100 for the account? The dividend is effectively the cash being withdrawn. The stock had on account a large amount of cash (which was factored into it's share price), it moved that cash out of it's account (to its shareholders), and as a result the stock instantly becomes priced lower as this cash is no longer part of it, just as it is in the bank account example. "Recently, I asked about what the company valuation is and how many   shares does my 4% represent.CFO told me that there is no point to talk   about ""shares"" or ""stock"" since the company is not public. Is it   right? No, it is wrong. Shares and stocks exist regardless of how they can be traded. Once a company is formed, there are stocks that belong to the owners in the proportion of the ownership. They may not exist physically, but they do exist on paper. As an owner of 5% of the company, you own 5% of the company stocks. I asked if my investor portion equity will be subjected under a   vesting schedule, CFO said yes. That doesn't make sense to me, because   I bought those 4%? Aren't those supposed to be fully vested? I agree   to my employee equity to be vested. Doesn't make sense to me either, since your money is already in their pocket. But I'm not sure if its illegal. If that's what is written in the signed contract - then may be its possible to have that situation. But it doesn't make much sense, because these shares are granted to you in return to your money, not some potential future work (as the 1% employee's portion). You already gave the money, so why wouldn't they be vested? Best to read the contract upon which you gave them your money, I really hope you have at least that and not just gave them a check...." Arguably the money made or lost on the particular stock in question wouldn't have happened without the story. The AIs are just taking advantage of market conditions caused by the story. The person who planted the story bought the stock prior to the story being dropped and sold before the stock dropped back down, which is illegal. "Seems like no one in this thread has heard of ""treasury stocks"", which indeed allow a company to own and sell its own stock. Think about it. When there is a stock buy-back funded by excess profits, where does that stock go?" Stock basically implies your ownership in the company. If you own 1% ownership in a company, the value of your stake becomes equal to 1% of the valuation of the entire company. Dividends are basically disbursal of company's profits to its shareholders. By holding stocks of a company, you become eligible to receiving dividends proportional to your ownership in the company. Dividends though are not guaranteed, as the company may incur losses or the management may decide to use the cash for future growth instead of disbursing it to the shareholders. For example, let's say a company called ABC Inc, is listed on NYSE and has a total of 1 million shares issued. Let's say if you purchase 100 stocks of ABC, your ownership in ABC will become Let's say that the share price at the time of purchase was $10 each. Total Investment = Stock Price * Number of Stocks Purchased = $10 * 100 = $1,000 Now, let's say that the company declares a dividend of $1 per share. Then,  Dividend Yield = Dividend/Stock Price = $1/$10 = 10% If one has to draw analogy with other banking products, one can think of stock and dividend as Fixed Deposits (analogous to stock) and the interest earned on the Fixed Deposit (analogous to dividend). ELI5 - you sell something that you don't own with the expectation that it will go down, and then you buy it back when it goes down in order to lock in profit.  You are charged fees to borrow the stock from someone else who currently owns it, and you also run the risk of the market going against you by going up. "This information is clearly ""material"" (large impact) and ""non-public"" according to the statement of the problem.  Also, decisions like United States v. Carpenter make it clear that you do not need to be a member of the company to do illegal insider trading on its stock. Importantly though, stackexchange is not a place for legal advice and this answer should not be construed as such.  Legal/compliance at Company A would be a good place to start asking questions." Matt Levine talked about a cute scam that this resembles, a kind of extended short squeeze. You manipulate up the stock of a company, so that it's obviously way above the fundamental value. Word will get out. Then the shorts come in. But the value remains stubbornly high. All the stock is held by a few insiders, but they didn't manipulate the stock price to do a pump and dump. They did it to milk the shorts on borrow cost. "What is a stock? A share of stock represents ownership of a portion of a corporation. In olden times, you would get a physical stock certificate (looking something like this) with your name and the number of shares on it. That certificate was the document demonstrating your ownership. Today, physical stock certificates are quite uncommon (to the point that a number of companies don't issue them anymore). While a one-share certificate can be a neat memento, certificates are a pain for investors, as they have to be stored safely and you'd have to go through a whole annoying process to redeem them when you wanted to sell your investment.  Now, you'll usually hold stock through a brokerage account, and your holdings will just be records in a database somewhere. You'll pick a broker (more on that in the next question), instruct them to buy something, and they'll keep track of it in your account.  Where do I get a stock? You'll generally choose a broker and open an account. You can read reviews to compare different brokerages in your country, as they'll have different fees and pricing. You can also make sure the brokerage firm you choose is in good standing with the financial regulators in your country, though one from a major national bank won't be unsafe.  You will be required to provide personal information, as you are opening a financial account. The information should be similar to that required to open a bank account. You'll also need to get your money in and out of the account, so you'll likely set up a bank transfer. It may be possible to request a paper stock certificate, but don't be surprised if you're told this is unavailable. If you do get a paper certificate, you'll have to deal with considerably more hassle and delay if you want to sell later.  Brokers charge a commission, which is a fee per trade. Let's say the commission is $10/trade. If you buy 5 shares of Google at $739/share, you'd pay $739 * 5 + $10 = $3705 and wind up with $3695 worth of stock in your account. You'd pay the same commission when you sell the stock.  Can anyone buy/own/use a stock? Pretty much. A brokerage is going to require that you be a legal adult to maintain an account with them. There are generally ways in which a parent can open an account on behalf of an underage child though. There can be different types of restrictions when it comes to investing in companies that are not publicly held, but that's not something you need to worry about. Stocks available on the public stock market are available to, well, the public. How are stocks taxed? Taxes differ from country to country, but as a general rule, you do have to provide the tax authorities with sufficient information to determine what you owe. This means figuring out how much you purchased the stock for and comparing that with how much you sold it for to determine your gain or loss. In the US (and I suspect in many other countries), your brokerage will produce an annual report with at least some of this information and send it to the tax authorities and you. You or someone you hire to do your taxes will use that report to compute the amount of tax owed. Your brokerage will generally keep track of your ""cost basis"" (how much you bought it for) for you, though it's a good idea to keep records. If you refuse to tell the government your cost basis, they can always assume it's $0, and then you'll pay more tax than you owe.  Finding the cost basis for old investments can be difficult many years later if the records are lost. If you can determine when the stock was purchased, even approximately, it's possible to look back at historical price data to determine the cost.  If your stock pays a dividend (a certain amount of money per-share that a company may pay out of its profits to its investors), you'll generally need to pay tax on that income. In the US, the tax rate on dividends may be the same or less than the tax rate on normal wage income depending on how long you've held the investment and other rules." "There are several such ""lists."" The one that is maintained by the company is called the shareholder registry. That is a list that the company has given to it by the brokerage firms. It is a start, but not a full list, because many individual shareholders hold their stock with say Merrill Lynch, in ""street name"" or anonymously. A more useful list is the one of institutional ownership maintained by the SEC. Basically, ""large"" holders (of more than 5 percent of the stock) have to register their holdings with the SEC. More to the point, large holders of stocks, the Vanguards, Fidelitys, etc. over a certain size, have to file ALL their holdings of stock with the SEC. These are the people you want to contact if you want to start a proxy fight. The most comprehensive list is held by the Depositary Trust Company. People try to get that list only in rare instances." "Careful with the ""stock stolen from your account"" thing.  SIPC protects investors against broker/dealer insolvency.  Don't think they provide protection against theft." "Some history: In the US, this is very tightly controlled and regulated. Although stock market securities insider trading is a relatively new crime around the world (20-30 year old), the United States  is exceptional for offering the longest sentences for it, although it is still far more lucrative than and carries lower sentences than something like petty larceny. The perception of illegal insider trading has changed in the US over the years, although it is based on much older fraud statutes the regulators and the courts have only really developed modern case law against insider trading in the past 20-30 years. The US relies on its vast network of registered broker-dealers to detect and report abnormal trading activity and the regulator (SEC) can quickly obtain emergency court orders from rent-a-judges (Administrative Law Judges) to freeze trader's assets to prevent them from withdrawing, or quickly enacting sanctions. So this reality helps deter trading on material inside information. So for someone that needs to get an information advantage on the market, it is [simply] necessary for them to rationalize how this information could be inferred from public sources.  Similarly there is a thin line between non-public information and public information, the ""lab experiment"" example would be material insider information, but the fact that there will be litigation over a company's key patents may be ""public"" as soon as the lawyer submits the complaint to the court system. It is also worth noting that there are A LOT of financial products trading in the capital markets, and illegal insider trading laws only applies to trading of shares of a company. So if a major holder in gold is about to liquidate all their holdings, being short gold futures is not subject to civil and criminal sanctions. Hope this helps. The above examples should help you understand what kind of information is material inside information and what kind is not, and how it is relevant to trading decisions." Of course, this calculation does not take into consideration the fact that once the rights are issues, the price of the shares will drop. Usually this drop corresponds to the discount. Therefore, if a rights issue is done correctly share price before issuance-discount=share price after issuance. In this result, noone's wealth changes because shareholders can then sell their stock and get back anything they had to put in. "I don't know why there is so much confusion on such a simple concept. The answer is very simple. A stock must eventually pay dividends or the whole stock market is just a cheap ponzi scheme. A company may temporarily decided to reinvest profits into R&D, company expansion, etc. but obviously if they promised to never pay dividends then you can never participate in the profits of the company and there is simply no intrinsic value to the stock. For all of you saying 'Yeah but the stock price will go up!', please people get a life. The only reason the price goes up is in anticipation of dividend yield otherwise WHY would the price go up?  ""But the company is worth more and the stock is worth more"" A stocks value is not set by the company but by people who buy and sell in the open market.  To think a stock's price can go up even if the company refuses to pay dividends is analogous to : Person A says ""Hey buy these paper clips for $10"". But those paper clips aren't worth that. ""It doesn't matter because some fool down the line will pay $15"". But why would they pay that? ""Because some fool after him will pay $20"" Ha Ha!" "Market Capitalization is the value the market attributes to the company shares calculated by multiplying the current trading price of these shares by the total amount of shares outstanding. So a company with 100 shares trading at $10 has a market cap of $1000. It is technically not the same as the value of a company (in the sense of how much someone would need to pay to acquire the company), Enterprise value is what you want to determine the net value of a company which is calculated as the market capitalization + company debt (as the acquirer has to take on this debt) - company cash (as the acquirer can pocket this for itself). The exact boundary for when a company belongs to a certain ""cap"" is up for debate. For a ""large cap""  a market capitalization of $10 billion+ is usually considered the cutoff (with $100+ billion behemoths being called ""mega caps""). Anything between $10 billion and ~$1 billion is considered ""mid cap"", from ~$1billion to ~$200 million it's called a ""small cap"" and below $200 million is ""nano cap"".  Worth noting that these boundaries change quite dramatically over time as the overall average market capitalization increases as companies grow, for example in the 80s a company with a market cap of $1 billion would be considered ""large cap"". The market ""determines"" what the market cap of company should be based (usually but certainly not always!) on the historical and expected profit a company makes, for a simple example let's say that our $1000 market cap company makes $100 a year,  this means that this company's earnings per share is $1. If the company grows to make $200 a year you can reasonably expect the share price to rise from $10 to ~$20 with the corresponding increase in market cap. (this is all extremely simplified of course)."