Rearranging Residual Claims: A Case for Targeted Stock

Posted: 27 Jun 1998

See all articles by Dennis E. Logue

Dennis E. Logue

The Brattle Group

James K. Seward

University of Wisconsin - Madison - Department of Finance, Investment and Banking

James P. Walsh

University of Michigan, Stephen M. Ross School of Business

Date Written: January 1996

Abstract

This paper describes and analyzes a relatively new method of equity-based restructuring, Targeted Stock. We examine announcement period share price reactions for completed, pending, and canceled offerings. Although the total number of completed transactions to date is small, we document a positive share price reaction on average for this form of equity reorganization. We then compare and contrast Targeted Stock with alternative equity reorganization forms, including spin-offs, equity carve-outs, and dual class common stock. We argue that Targeted Stock is most useful for firms in which the benefits of integration and control over corporate operating and financing activities outweigh the benefits of a complete or partial separation of the targeted business unit(s).

JEL Classification: G32, G34

Suggested Citation

Logue, Dennis E. and Seward, James K. and Walsh, James P., Rearranging Residual Claims: A Case for Targeted Stock (January 1996). Available at SSRN: https://ssrn.com/abstract=10051

Dennis E. Logue

The Brattle Group ( email )

44 Brattle Street
3rd Floor
Cambridge, MA 02138-3736
United States
617.864.7900 (Phone)

James K. Seward (Contact Author)

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

975 University Avenue
Madison, WI 53706
United States
608-263-2738 (Phone)
608-265-4195 (Fax)

James P. Walsh

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109-1234
United States
734-936-2768 (Phone)
734-936-0282 (Fax)

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