Exchangeable Security

DEFINITION of 'Exchangeable Security'

An investment instrument that grants its holder the right to trade it at some point in the future for a fixed number of shares of common stock of a firm, other than the issuer. An exchangeable security is one that is redeemable for the securities of another issuer, such as a subsidiary or affiliate of the issuer. The exchange may be at the option of the issuer or at the option of the holder of the security.

BREAKING DOWN 'Exchangeable Security'

Exchangeable securities are often issued by corporations that are involved in a takeover. The acquiring company wished to purchase the target company, but may need money to advance the transaction. The acquiring company can sell an exchangeable security, giving the owner of the exchangeable security the right to a specified number of shares in the target company after a specified date. If the transaction (acquisition) is successful, the exchangeable security can be traded for shares of the target company.

RELATED TERMS
  1. Security

    A financial instrument that represents an ownership position ...
  2. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for ...
  4. Issuer

    A legal entity that develops, registers and sells securities ...
  5. Exchangeable Debt

    A type of hybrid debt security that can be converted into the ...
  6. Common Stock

    A security that represents ownership in a corporation. Holders ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  3. Stock Analysis

    The Top 10 Small-Cap Stocks for 2016 (ATI, ARCB)

    Discover the top 10 small-cap stocks expected to grow in 2016, complete with summaries and growth outlooks for each company and its expected price target.
  4. Stock Analysis

    Dow Chemical: An Activist Investment Analysis (DOW)

    Read about how an activist hedge fund demanded changes at Dow Chemical. Learn about deal structure of the proposed merger between Dow and DuPont.
  5. Term

    What's a Vertical Merger?

    A vertical merger occurs when two companies that produce goods or services for the same finished product merge operations.
  6. Fundamental Analysis

    4 Reasons Small Cap Companies Are Actively Engaged in M&As

    Read about the reasons why smaller-cap companies actively take part in mergers and acquisitions (M&As). In addition to new synergies, they also access new markets.
  7. Entrepreneurship

    5 Boston Startups That Emerged This Century

    Learn why Boston is a hot market for startups, and familiarize yourself with a few of the top startups that have emerged from the city.
  8. Stock Analysis

    Staples: An Activist Investment Analysis (SPLS, ODP)

    Learn about Starboard Value LP's investor activism with Staples Inc. Find out what strategies were encouraged by Starboard and if the activism was successful.
  9. Stock Analysis

    5 Big Tech M&A Deals in 2015

    Read about five of the largest M&A transactions by total value in 2015, and learn a little about how the companies involved might fit together.
  10. Stock Analysis

    5 Big Food Industry M&A Deals in 2015 (KHC, KO)

    Read about some of the most important M&A transactions announced in the food sector in 2015, including one of the most talked about deals in any industry.
RELATED FAQS
  1. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  2. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>
  3. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  4. Are companies with high Book Value Of Equity Per Share (BVPS) takeover targets?

    Companies with high book value of equity per share (BVPS) can be good takeover targets if those companies are public and ... Read Full Answer >>
  5. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  6. If a company offers a buyback of its shares, how do I decide whether to accept the ...

    Tender offers for share buybacks are often made at a premium to the current market price; it may be in an investor’s best ... Read Full Answer >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center