Stock swap

In corporate finance a stock swap is the exchange of one equity-based asset for another, where, during the merger or acquisition, the swap provides an opportunity to pay with stock rather than with cash; see Mergers and acquisitions ยง Stock.

Not to be confused with Equity swap.
Examples
  • In 2010, two companies - Mirant and RRI Energy - came together to form GenOn Energy. The Mirant shareholders were given 2.885 shares of RRI for every share of Mirant that they owned. This stock swap helped facilitate the takeover by making the Mirant shareholders an attractive offer, thus convincing Mirant's board of directors to allow the takeover.
  • In 2014, South Korean Internet giant Daum Communications merged with Kakao Corp to form Daum Kakao in a stock swap deal. The merger ratio was approximately 1.14 so it is regarded as backdoor listing for Kakao.
  • In 2017, Disney acquired most of the 21st Century Fox assets in an all-stock deal valued at $52 Billion ($66 Billion if debt is included). With the acquired company shareholders owning 25% of the combined company, and Disney shareholders owning 75% majority.
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