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DEFINITION of 'Warrant Coverage'. An agreement between a company and its shareholders whereby the company issues warrants equal to some percentage of the dollar amount of the shareholder's investment. Next Up.
This would not give the investor any additional downside protection as the underlying shares would be issued at the same price that is currently paid for the stock. However, the warrant coverage would give the investor additional upside in the event that the company goes public or is sold at a price above $5 per share.