Definition of 'Exploding Warrant'
An equity derivative investment instrument that gives that holder the right, but not the obligation, to acquire the underlying instrument, and which is exercised only if the issuing company does not meet certain specified goals.
An exploding warrant becomes exercisable only in the event that the issuing company fails to meet certain goals, such as sales targets, product goals or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) values. If the specified goals are met, however, the warrant "explodes" and is not exercisable.
Also known as a "springing warrant."
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