Glossary: Save as you earn
A tax-efficient cash saving scheme that lets employees save towards buying shares in the company they work for at a discounted price. At the end of a specified term, participating employees have the option to buy shares in the company or take the savings in cash. The share option works like a warrant, with a special share price set (known as the option price). If the company’s shares have increased in value when the term is finished, employees can buy the shares at the option price. If the shares are worth less than the option price, the employee simply takes the cash.
A stockmarket security (a form of derivative) issued by companies on their own ordinary shares to raise capital. A warrant has a quoted price of its own that can be converted into a specific share at a predetermined price (called the conversion price) and future date. The value of the warrant is determined by the premium of the share price over the conversion price of the warrant. Warrants give the same economic exposure to an underlying security without actually owning it, and cost a fraction of the price of the underlying security.