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.

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RELATED FAQS
  1. What is a "gypsy swap"?

    A gypsy swap is a unique method by which a company may raise capital without issuing debt or holding a secondary offering. ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. What types of capital are not considered share capital?

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  5. How are swap agreements financed?

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