What Is a Toehold Purchase?

Business & Management
#1

A toehold purchase is when another company or individual investor buys less than 5% of a target firm’s outstanding shares with a specific purpose in mind. If another firm buys the toehold, it might be a prelude to an acquisition strategy like a takeover bid or tender offer. When an individual investor buys a toehold, they generally demand that the target company take actions to improve the firm’s shareholder value.