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A stub refers to a small portion of equity left in a company after a significant restructuring, such as a merger, acquisition, or spin-off. It can also describe the remaining equity interest in a parent company after it spins off a subsidiary, representing a fractional ownership stake in the new company. Stubs are often illiquid and speculative, making them riskier investments compared to larger shares.
After a company spins off a division as an independent entity, the remaining shares in the parent company may be referred to as stub equity, representing a small but potentially valuable part of the reorganized company.
• Represents a small equity portion after a merger, spin-off, or restructuring.
• Often illiquid and speculative.
• Can refer to a fractional interest in a newly formed entity post-spin-off.
They are often illiquid and speculative, with uncertain prospects following corporate restructurings.
Stubs result from spin-offs, mergers, or acquisitions, where the remaining equity interest in a parent or spun-off company represents a small ownership stake.
Risk-tolerant investors looking for potential high-reward opportunities in speculative situations may invest in stub equities.
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