When the Script is Deceptive: Misuse of Toehold Acquisitions in Private Placement Bidding

By Filzah Belal
Filzah Belal is a final year undergraduate law student at National Law University and Judicial Academy, Assam.

The capital market is a free platform for trading in securities, but what happens when external forces act on the market? It influences the prices of the shares, but not at all in an organic way. In this article, I will discuss one such situation when the prices are influenced by external forces in the share market to gain unfair profits – when prospective acquirers gain ‘toehold acquisitions’ in order to enjoy an upper hand in private placement procedure and do so by increasing activity in the script of the company which inorganically increases the shares’ price. Toehold acquisitions are those acquisitions which are done by a prospective investor. These acquisitions are usually done so that the target company knows that the investor is interested in investing Toehold acquisitions are often small acquisitions (hence the reference of the term to the size of a ‘toe’), but they are significant enough to come to the attention of the target company.

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