A special situation in finance is an atypical event which has the high potential to alter the future course of a business, materially impacting the company's value. The connotation of the event may be both positive (for example, merger or acquisition) and negative (conflict, distress, etc.) The notion also covers corporate
restructuring
Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. Other reasons ...
and corporate transactions, such as
spin-off
Spin-off may refer to:
*Spin-off (media), a media work derived from an existing work
*Corporate spin-off, a type of corporate action that forms a new company or entity
* Government spin-off, civilian goods which are the result of military or gove ...
s,
share repurchases,
security" \n\n\nsecurity.txt is a proposed standard for websites' security information that is meant to allow security researchers to easily report security vulnerabilities. The standard prescribes a text file called \"security.txt\" in the well known locat ...
issuance/
repurchase
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two par ...
, asset sales, or other catalyst-oriented situations. Further, a shareholders conflict is also considered a special situation.
Seeking for and investing in special situations is a strategy pursued by a number of investors. To take advantage of a special situation, a hedge fund manager must identify an upcoming event that will increase or decrease the value of the company's equity and equity-related instruments.
Definition
There is also a definition of special situation by
Benjamin Graham:
Classes of special situations
In his well-known book ''
Security Analysis'',
Benjamin Graham divides special situations into six classes:
[ Benjamin Graham]
"Special Situation Investing"
in '' Security Analysis'', 1951 edition, pp 729-734.
*Class A: Standard arbitrages, based on a reorganization,
recapitalization or merger plan
*Class B: Cash payout, in recapitalization or mergers
*Class C: Cash payments on sale or liquidation
*Class D: Litigated matters
*Class E: Public utility breakups
*Class F: Miscellaneous special situations
See also
*
Alternative investments
*
Bankruptcy
*
Default (finance)
In finance, default is failure to meet the legal obligations (or conditions) of a loan, for example when a home buyer fails to make a mortgage payment, or when a corporation or government fails to pay a bond which has reached maturity. A na ...
*
Distressed securities
*
Going concern
A going concern is a business that is assumed will meet its financial obligations when they become due. It functions without the threat of liquidation for the foreseeable future, which is usually regarded as at least the next 12 months or the spe ...
References
External links
What's Special About Special Situations Fixed Income?Special Situation Survey by Forbes
* ttp://www.fund.com/investment-resources/trackers/ Fund.com Special Situations Tracker
{{Private equity and venture capital, state=collapsed
Hedge funds
Alternative investment management companies
Institutional investors