Business, Legal & Accounting Glossary
A distress sale occurs when, despite non-favourable selling conditions, an asset is forced to be sold quickly due to extraneous conditions. For example, the sale of a foreclosed home is a distress sale. Other examples of a distress sale include the sale of stocks, futures contracts, or other investment products. In any of those cases, the distress sale can be due to a margin call or a bankruptcy situation. Stocks that are sold in a distress sale are sometimes referred to as distressed securities. Purchasing stocks from a company going thru a distress sale is sometimes used as an investment strategy. When purchasing distressed securities, an investor is betting on the chance that the company going thru the distress sale will recover. In a distress sale, liquidation value is used to estimate the value of the assets to be sold.
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This glossary post was last updated: 9th February, 2020 | 2 Views.