Gypsy Swap

AAA

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.

INVESTOPEDIA EXPLAINS '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. Treasury Stock (Treasury Shares)

    The portion of shares that a company keeps in their own treasury. ...
  2. Restricted Stock

    Insider holdings that are under some other kind of sales restriction. ...
  3. Shareholder

    Any person, company or other institution that owns at least one ...
  4. Insider

    A director or senior officer of a company, as well as any person ...
  5. Common Stock

    A security that represents ownership in a corporation. Holders ...
  6. ISDA Master Agreement

    A standard agreement used in over-the-counter derivatives transactions.
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 Full Answer >>
  2. What are interest rate swaps on the OTC market?

    Interest rate swaps are agreements where counter parties agree to exchange interest rate cash flows based upon the difference ... Read Full Answer >>
  3. What are the Securities and Exchange Commission regulations regarding swaps?

    The U.S. Securities and Exchange Commission (SEC) was granted the authority to regulate security-based swaps (SBS) by Title ... Read Full Answer >>
  4. What would motivate an entity to enter into a swap agreement?

    The main purpose of swap agreements is to swap cash flows between counterparties for a certain market or asset. Generally, ... Read Full Answer >>
  5. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  6. What is the difference between LIBOR, LIBID and LIMEAN?

    LIBOR, LIBID and LIMEAN are all reference rates used to benchmark short-term interest rates. The London Interbank Offered ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Options & Futures

    Investing 101: A Tutorial For Beginner Investors

    Do want to invest, but don't know how to begin? We'll show you the building blocks you need to get started.
  3. Economics

    Effects of OIS Discounting for Derivative Traders

    The use of OIS discounting has important implications for derivative valuations and could positively or negatively impact a trader's profit or loss.
  4. Investing

    How Swaptions Can Reduce Risk in Portfolios

    How can investing in Swaptions reduce risk in portfolios.
  5. Investing

    What Warren Buffet Calls "Weapons of Mass Destruction": Understanding the Swap Industry

    A full analysis of how the swap industry works.
  6. 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.
  7. Investing Basics

    ISDA Master Agreement

    The ISDA Master Agreement is a document outlining the terms of an over-the-counter derivatives transaction between two parties. This document serves as a standard agreement in these transactions ...
  8. Insurance

    Credit Default Swaps: What Happens In A Credit Event?

    The credit crisis of 2008 prompted important changes to the settlement of credit default swaps.
  9. Fundamental Analysis

    Derivatives 101

    Learn how to use this type of investment as an alternative way to participate in the market.
  10. Investing Basics

    The Barnyard Basics Of Derivatives

    This tale of a fictional chicken farm is a great way to learn how derivatives work in the market.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center