Legal Definitions - XW

XW stands for Ex-Warrants.

When a security, such as a bond or a share of stock, is traded "ex-warrants" (XW), it means that the buyer of that security will not receive any associated warrants that might have originally been issued alongside it. Warrants are financial instruments that give the holder the right, but not the obligation, to purchase additional shares of a company's stock at a specified price within a certain timeframe. When a security trades XW, it signifies that these warrants have been detached or separated from the primary security and are no longer included in the transaction.

• Example 1: Corporate Bond Sale

  A large technology company initially issued corporate bonds bundled with detachable stock warrants, allowing bondholders to purchase the company's stock at a set price. Later, an investor decides to sell their bonds. If these bonds are sold "XW," the buyer will receive only the bonds themselves and their associated interest payments. The original stock warrants, which were detached by the seller before the transaction, will not be transferred to the new bondholder. This illustrates XW because the warrants, though originally part of the package, are now excluded from the bond sale.

• Example 2: Secondary Market Stock Trading

  During a company's initial public offering (IPO), some shares were sold as units, meaning each share came with a warrant to buy an additional half-share in the future. After the IPO, these shares begin trading on the stock exchange. If an investor purchases these shares "XW" on the secondary market, they are buying only the common stock. The warrants, having been separated from the shares by previous owners, are not included in the purchase. The "XW" designation clearly indicates that the transaction is solely for the shares, without the accompanying right to buy more stock via the warrants.

• Example 3: Convertible Security Transaction

  A financial institution holds a block of preferred shares that were issued with attached warrants. These warrants grant the institution the option to convert them into common stock at a favorable rate. If the institution decides to sell these preferred shares to another investor and the transaction is designated "XW," it means the buyer will acquire only the preferred shares. The original warrants, which represent the right to convert into common stock, have been retained or sold separately by the financial institution and are not part of the preferred share purchase. This demonstrates XW by showing that the valuable conversion rights (via warrants) are explicitly excluded from the sale of the underlying preferred shares.