Investing News

The world of business has always been a harsh, survival-of-the-fittest environment. Like any realm that thrives on competition and the threat of losses, the investing world is rife with conflict. So it is not surprising to see so many military terms creeping into the vocabulary of everyday investors or TV analysts. Take a look at the war-related terms that have invaded the corporate ranks.

Key Takeaways

  • Scorched earth is a tactic that a hostile takeover target might use to fend off a buyer—by liquidating holdings and taking on debt to reduce the firm’s appeal. The technique reflects how Russia defeated the French in 1812.
  • In Nazi Germany, a Blitzkrieg was an attack launched from multiple angles at once; in modern finance, a Blitzkrieg tender offer is a buyout offer so pervasively positive that the takeover target quickly agrees.
  • In war, a dawn raid happens in the early morning when the enemy is unprepared; in finance, it’s when a hostile buyer grabs a huge share of a target firm at the market open before the target knows what’s going on.
  • To capitulate in war is to surrender or admit defeat; in financial markets, it’s synonymous with sharp declines, high volumes, and panic selling, often leading to a bottom being put in place.
  • A war chest has funds raised ahead of a possible war, or, in modern finance, ahead of a hostile takeover attempt. War bonds raise money for the war chest and correspond to modern government-issued bonds.
  • War babies are children born or raised during a time of war in their country, or who were fathered by foreign soldiers. In finance, they are stocks that flourish during wartime, like defense contractors.

Scorched Earth

In 1812, Czar Alexander Romanov decimated the French army that Napoleon led against Russia—even though the French had superior numbers, tactics, quality of soldiers, munitions, and everything else you’d put on your guaranteed-victory checklist. So how did one of the greatest military minds of all time lose in such a horrendous fashion? The simple answer is the Czar’s scorched-earth policy: As the Russian army retreated, they burned every shelter, animal, and plant that would catch fire, effectively leaving the French army without any “found” supplies to sustain them through a Russian winter. Napoleon’s previous campaigns relied heavily on the spoils of war to replenish the troops, so he was utterly unprepared for an adversary who would rather destroy his own kingdom than let another take it.

Scorched earth continues to be a terrifying strategy for aggressors to face. In business mergers and acquisitions, not every takeover is welcome. In order to scare off a hostile firm, the target firm will liquidate all its desirable assets and acquire liabilities. However, this approach can prove to be a suicide pill because, even if it is successful, the company must try to reassemble itself or go down in the flames of self-inflicted fire. 

Blitzkrieg Tender Offer

In the first two years of World War II, Nazi Germany crushed its opponents all over Europe by means of the Blitzkrieg or “lightning war” strategy, a set of tightly focused military maneuvers of overwhelming force. Striking with tanks, artillery, and planes in one area, the Nazis defeated France’s supposedly impenetrable Maginot Line, which was still accustomed to the traditional front-based warfare.

The Blitzkrieg strategy used in corporate takeovers is a slight departure from the German warfare of the 1940s. A Blitzkrieg tender offer is an overwhelmingly attractive offer a takeover firm makes to a target firm. The offer is designed to be so attractive that objections are few or nonexistent, allowing an extremely quick completion of the takeover. This tender offer’s allusion to World War II is based only upon the speed of the conquest; there was nothing alluring or attractive about the Nazis’ Blitzkrieg. 

Dawn Raid

When organized warfare and the military were considered “gentlemen’s affairs,” a declaration of war, a location, and a time would be issued to the adversary. Raids and guerilla warfare were the arenas of savages and rebels, not the tactics of a self-respecting army. However, the American Civil War, the two World Wars, the Vietnam War, and the improvement of weaponry obliterated the old code of warfare and made it commonplace to attack at any time—including dawn, when sleep is still thick in the enemy’s eyes. Because at daybreak the level of preparedness is lower, the dawn raid maximized enemy casualties and so became a standard military practice. This logic has carried over to the corporate sector.

A dawn raid in the investing world occurs when a firm (or investor) purchases a large portion of shares in a target firm at the opening of the market. A stockbroker for the hostile firm helps the firm build up a substantial stake (and maybe a controlling interest) in the unsuspecting target. The hostile firm significantly lowers its takeover costs by already holding a big chunk of its prey. Because the process is initiated through a brokerage and at the market opening, the target firm doesn’t figure out what’s going on until it’s too late. Even though only 15% of a firm’s stock can be captured in a dawn raid, this percentage is often enough for a controlling interest. (When an individual investor does this, they are referred to as a raider.)

A dawn raid is sneakier and more effective than a formal bid in most cases, but it may lead to resentment from the target firm. Unlike the dawn raid in war, the dawn raid of the corporate world makes the people you just attacked before their morning coffee not just your defeated enemies but now a part of your own army, meaning dissent may soon brew in the ranks.


Capitulation is a term that finds its roots in the medieval Latin word “capitulare,” which means “to draw up terms in chapters.” Since the 1600s, however, capitulate has been synonymous with surrender, or defeat, usually military defeat. In the stock market, capitulation refers to the surrendering of any previous gains in stock price by selling equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines, which are indicative of panic selling. After capitulation selling, many people believe the marketplace essentially becomes a bargain store because everyone who wanted out of a stock, for whatever reason (including forced selling due to margin calls), has sold. It follows logically (but only in theory) that the stock price should then reverse or bounce off of the lows. Simply put, some investors believe that true capitulation is the sign of a bottom

Military terms have crept into many vocabularies, and the fiercely competitive realm of finance is no exception.

War Chest and War Bonds

The gathering of a war chest is a practice that has been around as long as war itself. Emperors and kings would begin to amass tithes and taxes long before declaring war, presumably placing the funds in a chest. The reason for this hoarding was that experienced warriors cost money: Mercenaries made up the bulk of the leadership, and peasants, who were conscripted, provided the cannon fodder.

This tradition of saving up to wage war, either aggressively or defensively, has continued on into the modern world of corporate warfare. Simply put, a war chest refers to the funds a company uses to initiate or defend itself against takeovers.

Rather than pulling out of already-stretched budgets, the governments of some countries (the U.S. included) use war bonds to raise a war chest. War bonds are government-issued debt, and the proceeds from the bonds are used to finance military operations. War bonds essentially fund a war chest that is voluntarily filled by the public. The appeal for these bonds is purely patriotic as they generally offer a return lower than the market rate. Basically, buying a war bond is supposed to make citizens feel like they are doing their part to support the troops—in World War II, these bonds were hyped by sentimental persuasion and depictions of the evils of the enemy.

War Babies

War babies are quite common all over the world. Children are classified as war babies if they satisfy one or both of the following:

1. They were born or raised during an invasion of their country.

2. They were fathered by foreign soldiers. This was extremely common in Vietnam. In fact, there are still war babies attempting to gain U.S. citizenship.

In contrast, the war babies of the investing world are the companies that enjoy a jump in stock prices during or before a war (traditionally a time of decline for the market). These companies are usually defense contractors who build munitions, aircraft, artillery, tanks, etc. Although these companies aren’t the bastard children of foreign soldiers, people usually do avoid claiming war babies in times of peace.