Gypsy Swap

DEFINITION of 'Gypsy Swap'

A method in which a company may raise capital without issuing additional debt or holding a secondary public offering. Gypsy swaps consist of multiple transactions, with the ultimate result being an increase in capital for the business. By convincing existing shareholders to trade in common shares for restricted shares, the business can then sell the common shares to new investors, thus increasing capital.

BREAKING DOWN 'Gypsy Swap'

While gypsy swaps appear to be a roundabout way of creating capital, the act typically results in the company having to sweeten the pot for both new and existing shareholders in order to accept the terms of the deal. In most cases, gypsy swaps are last-ditch efforts to avoid cash constraints or bank covenants by engaging in some "creative" capital raising.

RELATED TERMS
  1. Forward Swap

    A swap agreement created through the synthesis of two swaps differing ...
  2. Swap

    A derivative contract through which two parties exchange financial ...
  3. Swap Rate

    The rate of the fixed portion of a swap as determined by its ...
  4. Substitution Swap

    An exchange that is carried out by trading a fixed-income security ...
  5. Asset Swap

    Similar in structure to a plain vanilla swap, the key difference ...
  6. Rate Anticipation Swap

    A type of swap in which bonds are exchanged according to their ...
Related Articles
  1. Active Trading

    An In-Depth Look At The Swap Market

    The swap market plays an important role in the global financial marketplace; find out what you need to know about it.
  2. Options & Futures

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  3. Investing Basics

    How Are Interest Rate Swaps Valued?

    When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps.
  4. Forex Education

    Currency Swap Basics

    Find out what makes currency swaps unique and slightly more complicated than other types of swaps.
  5. Trading Strategies

    Interest Rate Swaps Explained

    Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows.
  6. Investing News

    China Will Let Banks Swap Bad Debt for Equity

    Regulators are contemplating allowing banks to swap bad debt for equity in defaulting companies but such a move can increase the riskiness of banks' balance sheets.
  7. Investing

    Swaps

    Learn about this type of exchange which allows companies and individuals to capitalize on their comparative advantages.
  8. Economics

    Understanding Capital

    Capital has a variety of meanings, but it generally refers to financial resources.
  9. Investing Basics

    Why Do Companies Care About Their Stock Prices?

    Read on to learn more about the nature of stocks and the true meaning of ownership.
  10. Trading Systems & Software

    The Fast-Paced World of Libor & Fixed Income Arbitrage

    LIBOR is an essential part of implementing the swap spread arbitrage strategy for fixed income arbitrage. Here is a step-by-step explanation of how it works.
RELATED FAQS
  1. What would motivate an entity to enter into a swap agreement?

    Learn why parties enter into swap agreements to hedge their risks, and understand how the different legs of a swap agreement ... Read Answer >>
  2. When was the first swap agreement and why were swaps created?

    Learn about the history of swap agreements, the first swap agreement between IBM and the World Bank, and how swaps have evolved ... Read Answer >>
  3. How are swap agreements financed?

    Learn how swap agreements are now cleared by swap execution facilities and require the use of collateral margin to hold, ... Read Answer >>
  4. What are the Securities and Exchange Commission regulations regarding swaps?

    Learn how the SEC regulates trading of swaps, and how swap trading is moving from an over-the-counter market to centralized ... Read Answer >>
  5. What are interest rate swaps on the OTC market?

    Learn about interest rate swaps and how they are traded over the counter, and understand the impact of Dodd-Frank on swaps ... Read Answer >>
  6. Do interest rate swaps trade on the open market?

    Learn how interest rate swaps are traded on the OTC and interbank markets, and how these swaps can be used to arbitrage different ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center