What is Bought Out Deal: Definition & Meaning Explained

Definition of Bought Out Deal

A bought-out deal is a stock offering where an investment bank buys the entire issue of shares from a company. In turn, the investment bank will attempt to sell the shares to other investors. A deal of this kind has two benefits:

The company need not worry about subscription as the investment bank will purchase the entire offering
The investment bank can negotiate with the company and get the shares at a discount

That said, there are risks to a bought out deal like:

It is up to the investment bank to sell the shares to investors in order to recoup the principal or make a profit
The investment bank also runs the risk of receiving no interest in the shares from other investors
Guarantee purchase

If the issue size of the bought-out deal is large enough, the investment bank may team up with others to fulfil the purchase.

Income Stocks

Income stocks are shares of companies that help you earn a steady income, typically in the form of dividend payouts. At the same time, income stocks are known to have lower risk compared to others and thus, relatively decent returns over a period of time. But the consistently growing dividend yield makes up for the perceived lack of returns.

Debentures

A debenture is a legal certificate that a company issues in exchange for a long-term unsecured loan. A debt instrument like a debenture is issued by companies who want to fund their business without diluting existing shares.

The components of a debenture are as follows:

Principal: The loan amount or the money lent by an investor
Tenure: The duration of the loan
Interest rate: The rate of interest
Repayment: Terms and conditions of the amount to be repaid

Debenetures can also be issued by small-size companies who may not be creditworthy enough to secure a loan from traditional lenders. Hence, the unsecured aspect of the loan may help achieve their objective.

*All securities mentioned on this website are exemplary and not recommendatory.

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Bought Out Deal

Bought Out Deal

Definition of Bought Out Deal

Income Stocks

Company Debentures

Debentures

52 Week Low

Accrued Interest

Free Float Market Capitalization

Invest & Trade with a Trading
Platform That's #MadeForTrade

Bought Out Deal

Bought Out Deal

Definition of Bought Out Deal

Income Stocks

Company Debentures

Debentures

52 Week Low

Accrued Interest

Free Float Market Capitalization

Invest & Trade with a Trading Platform That's #MadeForTrade

Invest & Trade with a Trading
Platform That's #MadeForTrade