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.

Investopedia explains '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.



comments powered by Disqus
Hot Definitions
  1. Cash and Carry Transaction

    A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.
  2. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  3. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  4. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  5. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  6. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
Trading Center