Spin-Off
What is a Spin-Off? A corporate spin-off is an operational strategy used by a company to create a new business subsidiary from its parent company. A spin-off occurs when a parent corporation separates part of its business operations into a second publicly traded entity and distributes shares of the new entity to its current shareholders....
Divestiture
What is a Divestiture? A divestiture (or divestment) is the disposal of company’s assets or a business unit through a sale, exchange, closure, or bankruptcy. A partial or full disposal can happen, depending on the reason why management opted to sell or liquidate its business’ resources. Examples of divestitures include selling intellectual property rights, corporate...
Chinese Wall
What is a Chinese Wall? In finance, a Chinese Wall (or a Wall of China) is a virtual information barrier erected between those who have material, non-public information, and those who don’t, to prevent conflicts of interest. Below is an example of how a bank uses a Chinese Wall policy to comply with securities regulations....
Acquisition Premium
What is Acquisition Premium? Acquisition premium is the difference between the price paid for a target company in a merger or acquisition and the target’s assessed market value. It represents the excess amount over the fair value of all identifiable assets paid by an acquiring company. The acquisition premium is also known as goodwill and...
Direct Offering
What is a Direct Offering? A direct offering is sometimes referred to as direct placement. It is a type of offering that allows the issuing company to sell its securities directly to investors without using a middleman, such as an investment bank. When a company decides to use direct offering rather than an initial public...
Corporate Raider
What is a Corporate Raider? A corporate raider is an individual or a party that purchases a substantial position (enough to gain a controlling position) in a company that is deemed undervalued. In other words, a corporate raider is an individual that takes control (commonly through a hostile takeover) of an undervalued company. ...
Wall Street
What is Wall Street? There are two ways to look at what Wall Street is. It is both a geographical location and the financial mecca of the U.S. (and, arguably, of the world). Geographically, Wall Street spans eight blocks in Manhattan, New York. It runs east to west from Broadway to South Street, in the...
Brokerage
What is a Brokerage? A brokerage provides intermediary services in various areas, e.g., investing, obtaining a loan, or purchasing real estate. A broker is an intermediary who connects a seller and a buyer to facilitate a transaction. Individuals or legal entities can act as brokers. The broker performs its actions according to the client’s instructions....
Financial Intermediary
What is a Financial Intermediary? A financial intermediary refers to an institution that acts as a middleman between two parties in order to facilitate a financial transaction. The institutions that are commonly referred to as financial intermediaries include commercial banks, investment banks, mutual funds, and pension funds. They reallocate uninvested capital to productive sectors of...
Flotation Costs
What are Flotation Costs? Flotation costs are the costs that are incurred by a company when issuing new securities. The costs can be various expenses including, but not limited to, underwriting, legal, registration, and audit fees. Flotation expenses are expressed as a percentage of the issue price. After the flotation costs are determined by a...
