Business Glossary

stock traders' term, combining garbage and arbitrage, for activity in stocks swept upward by the psychology surrounding a major takeover. For example, when two leading entertainment stocks, Time, Inc., and Warner Communications, Inc., were in play in 1989, stocks with insignificant involvement in the entertainment sector became active. Garbatrage would not apply to activity in bona fide entertainment stocks moving on speculation that other mergers would follow in the wake of Time-Warner.

stock that may be rumored to be a takeover target or the party to some other major transaction such as a merger or leveraged buyout. The stock may be subject to a rumor of a prospective deal, or a deal may have been announced that attracts additional bidders and the company is said to be in play. Arbitrageurs and other speculators will attempt to buy deal stocks before the deal is finalized or profit when the stock price rises. Of course, if there is no deal, these speculators may lose money if the stock falls back to its pre-rumor price.