WarrantFinancial Dictionary -> Investing -> Warrant
If stock prices take a downturn and the investor would end up losing money if they used the stock warrant, then they can simply let it expire. The holder is not required to make the purchase, it just gives them the right to, and so if it looks unfavorable then they can just leave it, but they will still be out of pocket for the original price.
Once issued, stock warrants can be traded freely on the open market, so the original owner does not have to be the person that exercises the warrant. This may be done if the investor needs a quick return.
Warrants are issued with full backing of the company and are often used to entice investors in to buying more stock, or as consolation to previous investors of a company that is emerging from bankruptcy, that can't offer regular shares because they haven't fully recovered. It is also common for hot prospect startup companies that are likely to do well over the long haul to issue stock warrants that can be exercised later on for good profits.
There is a lot of paperwork involved with exercising stock warrants so it is best to use a broker to take care of everything for you.