Special Situation

Special Situation

An occurrence that may lead an investor to trade a particular security, usually to make a short-term gain. For example, if a company announces an earnings surprise, an investor may buy its stock in the hope of selling it later in the trading day for a higher price. Other examples of special situations include mergers and acquisitions and bankruptcy.

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special situation

A currently undervalued stock that can suddenly increase in value because of imminently favorable circumstances. For example, a firm may be about to bring a new, potentially profitable product to market. If everything turns out favorably, the gains in the firm's stock could be quite large. Another special situation might derive from the impending liquidation of a company. Special situations are usually quite risky.

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Special situation. An undervalued stock that one or more analysts expects to increase in price in the very near future because of an anticipated -- and welcome -- change within the company is known as a special situation.

That change could be the introduction of a major new product, a corporate restructuring, or anything else that has the potential to increase earnings.

In some cases, the fact that a stock is identified as a special situation creates a flurry of investor interest and actually helps drive the price up even before the change has had time to take effect.

A stock that is extremely volatile over the short term because of important recent news about the company, such as a takeover or spin-off, is also described as a special situation.