Gypsy Swap

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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.

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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 Full Answer >>
  2. How does an entrepreneur choose a business structure?

    Swaps are derivative contracts between two parties that involve the exchange of cash flows. Interest rate swaps involve exchanging ... Read Full Answer >>
  3. When was the first swap agreement and why were swaps created?

    Swap agreements originated from agreements created in Great Britain in the 1970s to circumvent foreign exchange controls ... Read Full Answer >>
  4. How are swap agreements financed?

    Since swap agreements involve the exchange of future cash flows and are initially set at zero, there is no real financing ... Read Full Answer >>
  5. What are the risks involved with swaps?

    The main risks associated with interest rate swaps, which are the most common type of swap, are interest rate risk and counterparty ... Read Full Answer >>
  6. 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 >>
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