Cheat Sheet for Special Situations

Definition: A special situation is a time-based, catalyst-driven subset of value investing. Naturally, the security trades at a price below intrinsic value, borne out of others' ignorance of the situation, and the investor tendency to avoid something that looks difficult to decipher. In other words, on the surface, these situations look "risky." Ambiguity fosters that appearance. As Maurece Schiller (the father of Special Situation Investing) puts it, these situations are unified by "corporate action."

Types of Special Situations
Mergers & Acquisitions (esp. those accompanied by a corporate raider with a sizable stake)

Liquidations (incl. asset sales, liquidating trusts, etc.)

Divestitures (incl. spin-offs)

Stubs (incl. residual claims of equity from buyouts, care-outs, spin-offs, reorganizations)

Recapitalizations and reorganizations (incl. dividend recaps, emergences from Chp. 11, etc.)


Tenders (incl. Dutch auctions, exchange offers, etc.)

Appraisals (claimants demanding fair value for securities, typically occurring in bankruptcy)

Unique corporate structures (incl. parent-subsidiary organizations are unclear)

Empire building management

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