What is a stock swap?

A stock swap is best defined as an acquisition payment method that utilizes stock. In this scenario, one company may use its own shares to pay for the shares of another company during an acquisition. This method allows the acquiring company to preserve cash while completing a transaction. Instead of paying in cash, the acquirer offers its own stock to the target company's shareholders, effectively exchanging one form of ownership for another.

This approach is often advantageous for both sides: the acquiring company can avoid the immediate financial burden of a cash transaction, and the shareholders of the target company may benefit from the potential appreciation of the acquiring company’s stock in the future. The use of stock in transactions can make mergers and acquisitions more attractive and accessible, particularly when cash reserves are limited or when companies want to align their interests going forward.

In contrast, repurchasing shares refers to a company's buyback of its own shares from the market, which is not relevant to acquisitions. A report measuring equity value would generally involve other metrics, not specifically about swapping stocks during an acquisition. Finally, a market tactic for short selling involves selling borrowed shares in anticipation of a price decline, which is unrelated to the concept of a stock swap.