How does the market value of a warrant relate to the company's stock?

The market value of a warrant is influenced by the value of the underlying stock. This relationship exists because a warrant gives the holder the right to purchase a company's stock at a predetermined price, known as the exercise price. If the stock's market price is higher than the exercise price, the warrant becomes more valuable because it allows the holder to buy the stock at a discount compared to its current market value. Therefore, as the market value of the company's stock increases, the market value of the warrant typically increases as well, reflecting that potential gain. This connection is fundamental in understanding how warrants are priced and traded in the securities market. The value of a warrant is also affected by other factors such as the time until expiration and market volatility, but its direct correlation with the stock price is a primary aspect of its valuation.