A warrant is a contract that gives the holder the right to purchase a certain number of additional shares of common stock in the future at a specific price. A SPAC warrant provides the holder with the right to buy more shares at a premium to the stock price at IPO. Investors in the IPO typically receive a unit comprised of one share of common stock and a fraction of a warrant. As an example, if the unit includes half a warrant to purchase a share at $12, and the stock goes to $15, then the warrant someone who bought 100 units could acquire 50 shares at a profit of $3 per share.
The most common SPAC warrants are either public warrants or private placement warrants. The public warrants typically have a call feature to be repurchased by the company if the shares reach a pre-determined level. Following the IPO, the warrants will trade separately from the common stock, meaning that investors can sell or exercise the warrant while holding the common stock, or vice-versa, depending on their trading strategies. Warrant holders generally do not have voting rights. Since March 2020, 59 SPACs without warrants have been filed, 24 of which are currently trading.