Author: Max Holmes

A war chest refers to reserves of cash set aside by a company in order to take advantage of an unexpected opportunity. This usually takes the form of acquiring other businesses, but war chests can also be used to defend against a hostile takeover or other adverse event. War chests are typically invested in short-term liquid […]

The Icarus Factor refers to when a company undergoes an overly ambitious project and does not succeed, leading to a decline in financial health. The phenomenon is associated with overly-enthusiastic, misguided leadership. The term comes from the mythological figure Icarus, whose artificial wings melted when he flew too close to the sun. Icarus-like occurrences often […]

The Nasdaq is a global electronic exchange used for buying and selling securities. Founded in 1971 by the National Association of Securities Dealers (NASD), the Nasdaq was one of the first marketplaces to allow investors to trade on a computerized, fast and transparent system rather than a traditional trading floor. It thus became the de facto exchange […]

An ugly duckling is a stock that is currently underperforming, but has the potential to rise again in the near term. In other words, ugly ducklings are stocks that are down, but not necessarily out. Often they are companies that have a history of performing well, and show signs of future performance not currently reflected in […]

A direct public offering (DPO) is an offering in which the company offers its securities directly to the public without use of an intermediary. The normal middlemen that would be involved in an initial public offering (IPO)–such as banks, broker-dealers, and underwriters–are left out of the picture. Instead, the company self-underwrites its securities, raising money independently […]

Parking (or stock parking) is the illicit practice of selling shares to another party with the mutual intention that the original owner will buy them back after a brief period of time. The goal of parking is to hide who really owns the stock while appearing to comply with regulations.  Often this is used to avoid having […]

The debt ceiling is a legislative limit to the amount the US government can borrow by issuing bonds. In other words, it is a congressionally-approved cap on how much national debt can be incurred by the US Treasury. The ceiling also applies to debt owed to federal government trust funds such as Social Security and […]

A Monte Carlo simulation (or probability simulation) is a technique for modeling the probability of different outcomes in processes where random variables make the outcome difficult to predict. Rather than replacing uncertain variables with a single average number, Monte Carlo simulations run many different possible variables. In finance, Monte Carlo simulations are used to estimate the probability […]

Painting the tape is a type of market manipulation in which investors collude to buy and sell a security among themselves, thereby creating the illusion of heavy trade activity. The uptick in activity can cause the security to attract attention from other investors, artificially driving up the price. The market manipulators then sell their shares […]

A backflip takeover is a rarely used type of takeover in which the acquiring company becomes a subsidiary of the acquired company after deal completion. This is the opposite of what occurs in a typical takeover, in which the target company becomes a subsidiary of the acquirer. Backflip takeovers usually occur when the acquiring company is […]