DEFINITION of 'Merger Securities'

A non-cash asset paid to the shareholders of a corporation that is being acquired or is the target of a merger. Theses securities generally consist of bonds, options, preferred stock and warrants, among others.

BREAKING DOWN 'Merger Securities'

Merger securities can become undervalued when large investment firms are required to sell them as a result of their strict investment requirements. For example, a large mutual fund may receive stock options from an acquiring company when one of the companies held in its portfolio is purchased. If the fund has a policy against holding options, it may be required to sell them, which can then cause the price of the options to fall to very low levels.

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RELATED FAQS
  1. How does a merger affect the shareholders?

    Explore the effect of a merger and understand how the process affects shareholders of the newly merged firm in terms of stock ... Read Answer >>
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    Learn how to utilize a simple merger arbitrage trading strategy to profit from the typical temporary price discrepancies ... Read Answer >>
  3. What is a stock-for-stock merger and how does this corporate action affect existing ...

    First, let's be clear about what we mean by a stock-for-stock merger. When a merger or acquisition is conducted, there are ... Read Answer >>
  4. How long does it take for a merger to go through?

    Corporate mergers and acquisitions can vary considerably in the time they take to be completed. There are a number of individual ... Read Answer >>
  5. What is the difference between a merger and a takeover?

    In a general sense, mergers and takeovers (or acquisitions) are very similar corporate actions - they combine two previously ... Read Answer >>
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    A stock option is a contract between two people that gives the holder the right, but not the obligation, to buy or sell outstanding ... Read Answer >>
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