How do SPAC warrants work on Freetrade?

Firstly, I’ve just been reading about SPACs and warrants for the first time, so forgive me if this is a silly question or if I’ve misunderstood something.

I’ve read that buying one unit of a SPAC usually comes with a warrant, which is exercisable after the de-SPAC event.

How does this process work on Freetrade? If I buy 1 share of SHLL and hold it until they merge with Hyliion, does that share get converted into 1 share of Hyliion automatically or is it just a warrant to be able to purchase half a share of Hyliion, for example, or both?

You won’t get the warrant buying shll on Freetrade.
Usually it works something like this-you can buy three versions of the SPAC-the unit, the warrant, and the common stock. A unit is simply a combination of the stock with the warrant , and is usually denoted with a U after the ticker, so by buying SHLL-U you would get 1 common stock plus 1 warrant.

If you’ve bought a share of common stock, that usually converts 1:1 into the new company, so you will get 1 share of Hyliion after the merger date. The warrants are also tradeable, I have seen them trade on International Brokers. The warrants are like an option, they give you the right to buy a share at a set price (usually $10). This means if Hyliion is trading at $40 and you own one warrant, you could use the warrant to buy a share of Hyliion for $10, immediately sell the share and pocket $30. Sometimes the prices don’t line up like this and people look for arbitrage between the warrants and common stock.

2 Likes

Thanks for the great explanation! :+1:t2: