Investor Sam bought a property directly in a private market transaction and then he was able to earn a profit by creating a publicly-traded entity and issuing stock to the public. What investment strategy did Sam use?

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Business

Donavan Huang

3 September, 21:37

Investor Sam bought a property directly in a private market transaction and then he was able to earn a profit by creating a publicly-traded entity and issuing stock to the public. What investment strategy did Sam use?

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Aussie · Answer 1

Answer: Arbitrage

Explanation: Arbitrage refers to the strategy in which the market participant earns profit by the price difference in two markets. In such strategy the investor purchases the security in one market at low price knowing that it will sell in another market for higher price.

In the given case, Sam bought the property directly into the private market and sold it knowing that he can profit from it in the stock market. Thus we can conclude that Sam used arbitrage strategy.