A purchase of less than 5% of the outstanding common stock in a company. Any purchase of 5% or more of a company's stock must be filed with the Securities and Exchange Commission (SEC), along with an explanation of intent. The company which you are buying the stock of will also be notified of your purchase.

In the case of a hostile takeover, the acquiring company may make a toehold purchase as a preliminary to the takeover attempt, giving them a small, hopefully unnoticed, advance on the total.

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