Stalking-Horse Bid

AAA

DEFINITION of 'Stalking-Horse Bid'

An initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company. From a pool of bidders, the bankrupt company chooses the stalking horse to make the first bid.

INVESTOPEDIA EXPLAINS 'Stalking-Horse Bid'

This method allows the distressed company to avoid low bids on its assets. Once the stalking horse has made its bid, other potential buyers may submit competing bids for the bankrupt company's assets. In essence, the stalking horse sets the bar so that other bidders can't low-ball the purchase price.

RELATED TERMS
  1. Acquisition

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

    A corporate action where an acquiring company makes a bid for ...
  3. Bankruptcy Risk

    The possibility that a company will be unable to meet its debt ...
  4. Distressed Sale

    When property, stocks or other assets are sold in an urgent manner, ...
  5. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
RELATED FAQS
  1. What can cause a merger or acquisition deal to fail?

    When two large companies announce plans to merge, or when the larger of the two acquires the smaller entity, the surviving ... Read Full Answer >>
  2. What happens when a corporation declares bankruptcy?

    When a corporation faces severe financial challenges that cause its inability to repay debt obligations, filing for protection ... Read Full Answer >>
  3. What happens to a company's stocks and bonds when it declares chapter 11 bankruptcy ...

    Filing for chapter 11 bankruptcy protection simply means that a company is on the verge of bankruptcy, but believes that ... Read Full Answer >>
  4. What was Robert Citron's role in Orange County, California's bankruptcy?

    In 1994, Orange County announced that its investment pool had lost $1.6 billion. The announcement from the Southern California ... Read Full Answer >>
  5. What happens if I own a stock that is purchased by another company after filing for ...

    In declaring bankruptcy, a company is basically telling the market that it owes more money than it is worth. If the company ... Read Full Answer >>
  6. Does a shareholder lose all of their equity once a Chapter 11 bankruptcy is filed ...

    When a company files for Chapter 11 bankruptcy, the management of the company is still in charge of the daily operations. ... Read Full Answer >>
Related Articles
  1. Markets

    How To Calculate A Z-Score

    Investors need to know how to detect signs of looming bankruptcy. The Z-score can help.
  2. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  3. Investing Basics

    The Dirt On Delisted Stocks

    Listed securities are "the cream of the crop". Find out how a firm can lose that status and why you should be wary.
  4. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  5. Economics

    Understanding Subordinated Debt

    A loan or security that ranks below other loans or securities with regard to claims on assets or earnings.
  6. Stock Analysis

    Will American Airlines Fall Back To Earth In 2015?

    The airline industry enjoys blockbuster profits, and American Airlines Group has been a key beneficiary of the favorable trends that have lifted stocks.
  7. Investing

    What is Equity Financing?

    Companies that are short on cash may need financing to pay for short-term needs or long-term capital expenditures.
  8. Stock Analysis

    What’s The Best Airline Stock In the Industry?

    With many airlines forced to seek bankruptcy protection, Southwest Airlines stands out as having consistently remained profitable throughout its history.
  9. Investing

    What's a Sunk Cost?

    A sunk cost was incurred in the past, is independent of future events and cannot be recouped. Economists teach that sunk costs should not be considered when making a financial decision. Rather, ...
  10. Investing

    What's a Divestiture?

    Divestiture is when a company, government or other organization sells, shuts down or otherwise eliminates a division or operating unit. Divestitures happen for many reasons. Management may decide ...

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center