Special Situation


DEFINITION of 'Special Situation'

Particular circumstances involving a security that would compel investors to trade the security based on the special situation, rather than the underlying fundamentals of the security or some other investment rationale. An investment made due to a special situation is typically an attempt to profit from a change in valuation as a result of the special situation, and is generally not a long-term investment.

BREAKING DOWN 'Special Situation'

A good example of special situation that would prompt investors' attention would be a large public company spinning off one of its smaller business units into its own public company. If the market deems the soon-to-be-spun-off company to have a higher valuation in its present form than it will after the spinoff, an investor might buy shares in the larger company before the spinoff in an attempt to realize a quick price increase.

There are many other circumstances that could be referred to as special situation investment opportunities such as tender offers, mergers and acquisitions, and bankruptcy proceedings.

  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Tender Offer

    An offer to purchase some or all of shareholders' shares in a ...
  3. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  6. Discharge In Bankruptcy

    A permanent order that releases the debtor from personal liability ...
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  1. How can a company execute a tax-free spin-off?

    The two commonly used methods for doing a tax-free spinoff are either to distribute shares of the spinoff company to existing ... Read Full Answer >>
  2. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  3. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  4. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  5. What happens to the company stock if a subsidiary gets spun off?

    When a subsidiary gets spun off, the company's stock tends to drop. However, the investor in the stock does not lose any ... Read Full Answer >>
  6. What are some common cash-debt strategies that occur during a spinoff?

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