In this case you would hold a warrant with a strike price of $4.00. As long as the SP is below that price the warrants have no value. If they become tradable. there will be a speculative value to them. If the SP goes above this price, say to 5.00, then the warrant has a firm value of 1.00. If they are tradable, they will be worth 1.00 plus whatever speculative value is there.

If there was a buyout, the offer would include an allowance for the warrants. If the buyout price was 6.00, it would include an offer of 2.00 for the warrants.

Clear as mud

K