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.


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.

  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. Credit Default Swap - CDS

    A particular type of swap designed to transfer the credit exposure ...
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  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 the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  3. Should you calculate Value at Risk (VaR) for counterparty credit risk?

    Value at risk (VaR) calculations may be helpful for risk management when trading credit default swaps and other derivatives ... Read Full Answer >>
  4. For what financial instruments is a modified duration relevant?

    The modified duration is a formula used to calculate the percent change in the price of a financial instrument when there ... Read Full Answer >>
  5. What is the difference between derivatives and swaps?

    Derivatives are securities with prices dependent on one or multiple underlying assets. Common derivatives include forward ... Read Full Answer >>
  6. Why is tenor important on credit default swaps?

    Tenor – the amount of time left on a debt security's maturity – is important in a credit default swap because it coordinates ... Read Full Answer >>

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