A component of the value of a warrant (warrant value) that is measured as the difference between its underlying share price and its exercise price:

Formula value = (share price – exercise price) x number of new shares issued on exercise

If the exercise price exceeds the share price, the formula value is zero, and the warrant is said to be out-of-the-money. If the share price is higher than the exercise price the warrant is in-the-money by as much as that positive difference.

The formula value is also known as a warrant’s intrinsic value.