Stub

DEFINITION of 'Stub'

The balance part of a check or receipt that is retained for record-keeping purposes or as proof of payment. In the context of securities, a stub refers to a residual security that is left over after being separated from the parent security. The term may also refer to a stock formed from the conversion of a company's bonds under distressed conditions, such as a bankruptcy or recapitalization.

BREAKING DOWN 'Stub'

As residual securities, stubs are not viewed as very desirable instruments, since the parent security may retain most of the attractive attributes of the original investment.


Stub stocks derive their name from their low price, which is usually a fraction of the value of the bonds from which they have been converted. The low stock price reflects the uncertainty surrounding the recapitalized company, and makes stub stocks a highly speculative investment with the potential for significant positive returns if the company is successful in making a turnaround.

RELATED TERMS
  1. Check

    A written, dated and signed instrument that contains an unconditional ...
  2. Security

    A financial instrument that represents an ownership position ...
  3. Debt/Equity Ratio

    Debt/Equity Ratio is debt ratio used to measure a company's financial ...
  4. Paycheck-To-Paycheck

    An expression used to describe an individual who would be unable ...
  5. Non-Security

    A type of investment that is not as freely marketable or transferable ...
  6. Junk Bond

    A colloquial term for a high-yield or non-investment grade bond. ...
Related Articles
  1. Bonds & Fixed Income

    Junk Bonds: Everything You Need To Know

    Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.
  2. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  3. Mutual Funds & ETFs

    Did ETFs Cause The Flash Crash?

    On May 6, 2010, the DJIA plunged 998.5 points in twenty minutes. Find out more about what happened that day.
  4. Investing

    Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!
  5. Stock Analysis

    Are U.S. Stocks Still the Place To Be in 2016?

    Understand why U.S. stocks are absolutely the place to be in 2016, even though the year has gotten off to an awful start for the market.
  6. Term

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  7. Term

    Understanding Market Price and Its Changes

    An asset’s or service’s market price is the current price at which it can be bought and sold.
  8. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  9. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  10. Professionals

    Is A Stockbroker Career For You?

    Becoming a stockbroker requires a broad skill set and the willingness to put in long hours. But the rewards can be enormous.
RELATED FAQS
  1. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  2. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  3. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  4. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  5. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
  6. What are the requirements for being a Public Limited Company?

    The requirements for an entity to be considered a public limited company (PLC) include registration requirements, establishing ... Read Full Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  3. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  4. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  6. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
Trading Center