Which characteristic is true of warrants compared to pre-emptive rights?

Warrants are financial instruments that give holders the right to purchase a company's stock at a predetermined price, usually within a certain time frame. This makes them similar to options but specifically tied to the underlying stock of a company. The correct choice highlights that warrants serve as purchase options for common stock. When investors purchase warrants, they are essentially securing the right to acquire shares of a company's common stock in the future, which can be advantageous if the stock price rises above the exercise price of the warrant.

In contrast to pre-emptive rights, which are typically granted to existing shareholders to protect against dilution by allowing them to maintain their ownership percentage when new shares are issued, warrants can be issued to both new and existing investors. This can lead to dilution since exercising warrants increases the number of shares outstanding.

Overall, the nature of warrants as options to purchase stock positions them distinctly from pre-emptive rights, focusing on granting future acquisition opportunities rather than protecting existing ownership stakes.