A warrant that allows the holder to buy a given amount of a firm’s securities at the so-called nominal exercise price. This exercise price is set at a very low value, usually one cent ($0.01) per share (hence the name penny warrant). The warrant structure is pre-funded, meaning that it allows the issuing firm to receive the exercise price of a not pre-funded warrant, except for the nominal exercise price, at the time of issuance rather than the time of exercise.

A penny warrant can be exercised, wholly or partially immediately after issuance and typically over a long exercise period (up to 10 years). However, a pre-funded warrant that expires unexercised is valueless and the purchase price of the warrant incurred by the holder is not refundable in any case.

This warrant is also known as a pre-funded warrant.