“NEW STOCK ARBITRAGE”

When a company wants to raise capital by issuing additional shares, the shares are purchased by underwriters before they are sold on the secondary market.

If shares are not fully subscribed, the outstanding shares would likely remain open to institutional investors as market trading commences.

When the secondary market price is higher than the subscription price, a short position can be initiated at market price and simultaneously closed out by buying the corresponding number of shares at the lower subscription price.

Conditions To Arbitrage

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