Exchangeable Security

AAA

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.

INVESTOPEDIA EXPLAINS '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. Takeover

    A corporate action where an acquiring company makes a bid for ...
  2. Preferred Stock

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

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

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

    A security that represents ownership in a corporation. Holders ...
  6. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
RELATED FAQS
  1. Why should management teams focus more on horizontal integration?

    Management teams should focus more on horizontal integrations because they allow for economies of scale, economies of scope, ... Read Full Answer >>
  2. Why are the terms 'merger' and 'acquisition' always used together if they describe ...

    The terms "merger" and "acquisition" are used together because they both describe processes by which two companies become ... Read Full Answer >>
  3. What level of mergers and acquisitions is common in the chemical sector?

    The level of mergers and acquisitions (M&As) in the chemicals sector has surged to an all-time high since the turn of ... Read Full Answer >>
  4. How can a company buy back shares to fend off a hostile takeover?

    There are several reasons why a company may choose to repurchase some or all of the outstanding shares of its stock. This ... Read Full Answer >>
  5. How does the level of mergers and takeovers in the Internet sector compare to the ...

    The level of mergers and takeovers in the Internet sector is higher than in the broader market. The Internet sector contains ... Read Full Answer >>
  6. What business structures expose entrepreneurs to unlimited liability?

    A company that seeks to expand through a horizontal integration can achieve economies of scale, economies of scope, increased ... Read Full Answer >>
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. Investing

    American Airlines & US Airways Merger: It Matters!

    While the two airlines' merger creates a new giant in the industry and reduces choice for consumers and employees, investors should benefit.
  4. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.
  5. Fundamental Analysis

    Explaining Enterprise Multiple

    The enterprise multiple is a ratio used to value a company as if it was going to be acquired.
  6. Chart Advisor

    3 Basic Material Stocks Poised For A Pop

    After large market swings such as the one seen on March 30, 2015, it is not surprising to see traders become more tolerant towards taking on risk.
  7. Stock Analysis

    Will Kraft-Heinz Be a Winner?

    Kraft and Heinz are now one. This should present a profitable long-term investment opportunity, but isn't likely to be smooth sailing at first.
  8. Investing

    WhatsApp: The Best Facebook Purchase Ever?

    WhatsApp is Facebook's largest acquisition to date. What makes it worth the major price tag?
  9. Fundamental Analysis

    Private vs Public Equity: What's Best?

    What is the better way for a company to attract investors; by making its stock available for sale to whoever wants some, or by petitioning rich people?
  10. Investing News

    Sun Pharma And Ranbaxy: An Ideal Pharma Marriage?

    The Sun Pharma merger with Ranbaxy will blend the complementary market strengths and areas of expertise of each company and create a powerful pharma force.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center