Legal Jargon: A Primer

Clients choose Pillsbury because they seek highly specified information or require answers to complex legal and business problems from experienced counsel (not to mention just what it means when you receive an email asking if you’re interested in a BIMBO). We believe journalists also can benefit from that experience when seeking an insightful comment, legal background or just someone who can interpret the latest legal or business jargon for their stories. Whether a client, journalist or just a word aficionado, below are some of our favorite terms and acronyms.

Barefoot Pilgrim

A slang term for an unsophisticated investor who has lost everything on the stock market.

Bear Hug

Often used in risk arbitrage. Hostile takeover attempt in which the acquirer offers an exceptionally large premium over the market value of the acquiree’s shares so as to as to squeeze (hug) the target into acceptance.

Big Boy Letter

Big Boys are typically used when an investor has confidential information about a stock or bond and wants to sell those securities. By signing the letter, the buyer effectively recognizes that the seller has better information, but promises not to sue the seller, much like a homebuyer who agrees to buy a house in "as is" condition. Basically, “we’re all big boys here, so let’s play ball.”

Big Uglies

Unpopular stocks.

BIMBO

Buy-In Management Buyout—a form of a buyout that incorporates characteristics of both a management buyout and a management buy-in.

CFAT

Cash Flow After Taxes—a measure of financial performance that looks at the company’s ability to generate cash flow through its operations.

Clawback

Commonly used in venture capital fund documents. To the extent that general partner of the fund is found to have received distributions exceeding the allocated share of profits, the clawback provision requires redistribution to the limited partners of the excess amounts.

Conjure Up Test

A test that courts use in copyright case about parodies. A parodist can copy at least as much of the original work to “conjure up” the original in the mind of the audience.

COUGRS

Certificate Of Government Receipts—U.S. Treasury fixed-income securities that are stripped of their coupon payments and provide payment of face value.

CUSIP

Committee on Uniform Securities Identification Procedures.

Credit-default Swap

A contract or insurance policy between a seller (a bank) and a buyer (bondholder). The CDS maintains that the seller agrees to pay the buyer in the event of a bond default or bankruptcy. A CDS is essentially bond insurance. When one bond starts defaulting, it can create a ripple effect for other bonds to default because people lose confidence in the market. To protect bondholders from losses when there is a bankruptcy or a default, banks can agree to a CDS where they will replenish a bondholder’s losses.

Dead Cat Bounce

A temporary rise in the price of a stock, or the market, after a sharp decline: used to imply that further decline is coming.

Dirty Float

A type of floating exchange rate that is not completely freely floating because central banks intervene from time to time to alter the rate from its free-market level. It is still a floating rate because it has not been pegged at a predetermined par value.

Full Ratchet

A type of anti-dilution protection in which the conversion price of a convertible security is reduced to a lower price when common stock is later issued.

Genercide

Cancellation of, or recognition by a court, that a mark is generic and no longer serves to identify a source of a product, and therefore cannot be protected as a trademark.

Gunslinger

An aggressive portfolio manager who makes risky investments, typically in margin accounts, in search of high returns.

KIPPERS

Kids in Parents’ Pockets Eroding Retirement Savings—a slang term referring to adult children who are out of school and in their working years, but are still living at home with their parents.

Lipstick Indicator

An indicator based on the theory that a consumer turns to less expensive indulgences, such as lipstick, when she (or he) feels less than confident about the future.

Moral Hazard

The risk that someone is cheating, has provided misleading information, or has an incentive to take unusual risks in a desperate attempt to earn a profit.

NINJA

No income. No job or assets. A loan made to a high-risk borrower without requesting proper documentation.

Pari Passu

Latin for “with equal step.” In law, it means to treat equally and without preference. In finance, it refers to two or more securities having equal rights of payment or level of seniority.

PIPE

Private Investment in Public Equity—an example of this type of transaction may be a private equity firm investing in a government venture like an infrastructure project.

Poison Pill

Anti-takeover device that gives a prospective acquiree’s shareholders the right to buy shares of the firm or shares of anyone who acquires the firm at a deep discount to their fair market value. Named after the cyanide pill that secret government agents are said to be instructed to swallow if capture is imminent.

Saturday Night Special

Often used in risk arbitrage. Sudden attempt by one company to take over another by making a public tender offer.

Shark Repellant

Term for any one of a number of measures taken by a company to fend off an unwanted or hostile takeover attempt.

TIGRS

Treasury Investment Growth Receipts—introduced by Merrill Lynch, TIGRs are stripped Treasury securities offered at a significant discount to face value and backed by the U.S. government.

Thin Copyright

The scope of fair use of a copyrighted work is likely greater if there is not much original copyrightable expression to begin with.

Topless Meeting

A meeting in which the participants are barred from using their laptops, Blackberries, cellphones, etc.

Toxic Debt

Mainly sub-prime debts that are now proving so disastrous to banks. They were parceled up and sent around the global financial system like toxic waste, hence the allusion.

VIPERS

Vanguard Exchange-Traded Funds—a class of ETFs offered by Vanguard and traded like any other share on the American Stock Exchange.

War Babies

Slang term for the stocks and bonds of corporations in the defense industry.

White Knight

A friendly potential acquirer sought out by a target firm that is threatened by a less welcome suitor.

Yard

Used particularly in currency trading, slang for one billion currency units.

To suggest additional legal or business terms or acronyms we can add to this list, or identify a potential legal source for an upcoming story, please email Sandi Sonnenfeld.