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. Common Stock

    A security that represents ownership in a corporation. Holders ...
  3. Exchangeable Debt

    A type of hybrid debt security that can be converted into the ...
  4. Issuer

    A legal entity that develops, registers and sells securities ...
  5. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  6. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
Related Articles
  1. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  2. Stock Basics Tutorial
    Investing Basics

    Stock Basics Tutorial

  3. How Mergers and Acquisitions Can Affect ...
    Investing Basics

    How Mergers and Acquisitions Can Affect ...

  4. The Biggest Mergers & Acquisitions In ...
    Investing Basics

    The Biggest Mergers & Acquisitions In ...

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center