Stock Market Glossary
Squeeze out
Forced compensation of minority shareholders by a major shareholder.
In brief: Forced compensation of minority shareholders by a major shareholder.
Meaning in practice
In Germany, a shareholder who owns 95 percent (90 percent under merger law) of the shares can squeeze out the remaining shareholders. The amount of the severance payment is determined in a way that can be reviewed by the courts – often improved over the years in adjudication proceedings.
Context for investors and traders
For investors, the term becomes practical in the context of objectives, time horizon, risk capacity and costs. A suitable solution can differ between two people even when they consider the same product or metric.
How to use this in practice
The term becomes practical when expressed in numbers: what is the position weight, which costs apply, what loss is possible and what role does it play in the portfolio? These questions prevent an otherwise useful product from becoming too large or being used at the wrong time.
What to keep in mind
Include taxes, spreads, product structure and personal liquidity reserves in comparisons. Historical returns and a fund’s or index’s characteristics describe the past, not a promised future result.