Call Warrant
Definition
Section titled “Definition”A Call Warrant gives the holder the right—but not the obligation—to receive cash (or physical shares) equal to the difference between the underlying company’s valuation at exercise and the strike price, if positive.
Call Warrant Payoff = max(0, Valuation at Exercise - Strike Price)Structure
Section titled “Structure”┌─────────────────────────────────────────────────────────────────┐│ CALL WARRANT STRUCTURE │├─────────────────────────────────────────────────────────────────┤│ ││ ┌───────────────┐ ┌───────────────┐ ││ │ BUYER │ │ ISSUER │ ││ │ (Anyone) │ │ (Platform) │ ││ └───────┬───────┘ └───────┬───────┘ ││ │ │ ││ │ Premium (USDC) │ ││ │ ───────────────────────▶│ ││ │ │ ││ │◀─────────────────────── │ ││ │ Warrant Tokens │ ││ │ │ ││ │ ▼ ││ │ ┌───────────────┐ ││ │ │ SPV VAULT │ ││ │ │ (Real Shares)│ ││ │ └───────────────┘ ││ │ ││ │ On Exercise (if ITM): ││ │ │ ││ │◀─────────────────────── │ ││ │ Cash Settlement │ ││ │ (or Physical Shares) │ ││ │└─────────────────────────────────────────────────────────────────┘Specifications
Section titled “Specifications”| Parameter | Value |
|---|---|
| Type | European-style with Bermuda exercise windows |
| Underlying | Pre-IPO company valuation |
| Strike | Fixed valuation (e.g., $200B) |
| Premium | Market-determined via AMM |
| Expiry | Quarterly (Q1/Q2/Q3/Q4) |
| Settlement | Cash (default) or Physical (VIP only) |
| Collateral | 100% backed by SPV-held shares |
| Minimum Trade | $100 equivalent |
| Token Standard | ERC-20 Extended |
Collateral Backing
Section titled “Collateral Backing”SPV Structure
Section titled “SPV Structure”┌─────────────────────────────────────────────────────────────────┐│ SPV STRUCTURE │├─────────────────────────────────────────────────────────────────┤│ ││ Platform Entity ││ (Operating Company) ││ │ ││ │ 100% ownership ││ ▼ ││ ┌───────────────────┐ ││ │ PIPO Holdings Ltd │ ◄── Cayman Islands SPV ││ │ (SPV Parent) │ ││ └─────────┬─────────┘ ││ │ ││ ┌────────┼────────┬────────────┐ ││ ▼ ▼ ▼ ▼ ││ ┌─────┐ ┌─────┐ ┌─────┐ ┌─────────┐ ││ │SPV-1│ │SPV-2│ │SPV-3│ │ ... │ ││ │Space│ │Open │ │Stripe│ │ Future │ ││ │ X │ │ AI │ │ │ │Underlyings│ ││ └──┬──┘ └──┬──┘ └──┬──┘ └─────────┘ ││ │ │ │ ││ ▼ ▼ ▼ ││ [Shares] [Shares] [Shares] ││ │└─────────────────────────────────────────────────────────────────┘Backing Ratio
Section titled “Backing Ratio”| Call Warrant Issued | SPV Must Hold |
|---|---|
| $1M notional | $1M equivalent shares |
| $10M notional | $10M equivalent shares |
No fractional reserve. No leverage. 100% backing.
Pricing
Section titled “Pricing”AMM Price Discovery
Section titled “AMM Price Discovery”Call warrant prices are determined by CPMM (Constant Product Market Maker):
Price = f(Supply, Demand, Time to Expiry, Oracle Valuation)Price Bounds
Section titled “Price Bounds”| Scenario | Warrant Price | Rationale |
|---|---|---|
| Deep OTM | ~$0.05-0.15 | Low probability of profit |
| ATM | ~$0.35-0.50 | ~50% probability |
| ITM | ~$0.65-0.85 | High probability |
| Deep ITM | ~$0.90-0.98 | Near certainty |
Example
Section titled “Example”Underlying: SpaceXCurrent Valuation: $180B (Oracle)Strike: $200BExpiry: 6 months
Warrant Price: $0.30
Interpretation:- Market implies ~30% probability SpaceX reaches $200B- Or ~30% expected return if valuation reaches targetExercise Scenarios
Section titled “Exercise Scenarios”Scenario 1: In-the-Money (ITM)
Section titled “Scenario 1: In-the-Money (ITM)”Strike: $200BValuation at Exercise: $250BNotional: $1,000
Payoff = $1,000 × ($250B - $200B) / $200B = $1,000 × 25% = $250 profit (+ return of premium if sold early)Scenario 2: Out-of-the-Money (OTM)
Section titled “Scenario 2: Out-of-the-Money (OTM)”Strike: $200BValuation at Exercise: $180BNotional: $1,000
Payoff = $0 (worthless expiry)Loss = Premium paidScenario 3: At-the-Money (ATM)
Section titled “Scenario 3: At-the-Money (ATM)”Strike: $200BValuation at Exercise: $200BNotional: $1,000
Payoff = $0 (no intrinsic value)Loss = Premium paidPhysical Delivery Option
Section titled “Physical Delivery Option”Eligibility
Section titled “Eligibility”- Minimum holding: $500K+ in Call Warrants
- KYC/KYB: Completed institutional onboarding
- Timing: Request during exercise window
Process
Section titled “Process”Physical Delivery Process├── 1. Request submission (during exercise window)├── 2. KYC/AML verification (if not completed)├── 3. SPA (Share Purchase Agreement) signing├── 4. Payment settlement (USDC or wire)├── 5. SPV share transfer (T+15 typical)└── 6. Warrant token burnPricing
Section titled “Pricing”Physical delivery price = Cash settlement value + 20% discount fee
Why the discount?
- Operational costs (legal, transfer)
- Illiquidity premium (shares are restricted)
- Incentive to take cash (simpler for platform)
Risk Factors
Section titled “Risk Factors”| Risk | Description | Mitigation |
|---|---|---|
| Valuation Risk | Oracle may misprice | Multi-source oracle, dispute process |
| Time Decay | Value erodes as expiry approaches | Clear expiry schedule, rollover option |
| Liquidity Risk | AMM may have thin liquidity | LP incentives, platform seeding |
| Underlying Risk | Company may fail or down-round | Diversification, due diligence |
| Smart Contract Risk | Code vulnerabilities | Audits, bug bounties, insurance |
Use Cases
Section titled “Use Cases”1. Bullish Speculation
Section titled “1. Bullish Speculation”“I believe SpaceX will be worth $250B within 12 months. I buy $1,000 of Call Warrants at $0.35. If I’m right, my warrants are worth $1.25, a 257% return.”
2. Diversified Tech Exposure
Section titled “2. Diversified Tech Exposure”“I want broad exposure to private tech without picking winners. I buy equal amounts of SpaceX, OpenAI, and Stripe calls. Portfolio approach to pre-IPO alpha.”
3. Employee Upside Amplification
Section titled “3. Employee Upside Amplification”“I’m an OpenAI employee with stock options. I’m already exposed but want more upside. I buy additional Call Warrants to amplify my position.”