toehold purchase

Toehold Purchase

A purchase of less than 5% of a target company's outstanding stock made by an acquiring company.

Notes:

Companies are free to purchase up to less than 5% of any company. But once a company purchases 5% or more of another company, the acquirer must file with the SEC and explain to the target firm in writing the reason for the purchase of 5% or more of its stock.

See also: Acquisition, Hostile Takeover, Takeover

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Toehold purchase

Often used in risk arbitrage. Accumulation by an acquirer of less than 5% of the shares of a target company. Once 5% is acquired, the acquirer must file with the SEC and other agencies to explain its intentions and notify the acquiree. See: Rule 13d.

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toehold purchase

The purchase of less than 5% of the outstanding common shares of a target company before establishing a much larger stake. A toehold purchase allows a party to buy stock in a company without filing a notice with the SEC and with the target company.