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  1. 1. Stock and share
  2. 2. Shares  Definition: Shares are the unit of equity ownership in a corporation. This ownership is represented by a stock certificate, which names the company and the shareowner.
  3. 3. Shares  Dividend is the distribution of earnings to shareholders, prorated by class of security and paid in the form of money, stock, scrip, or, rarely, company products or property.  The amount is decided by the board of directors and is usually paid quarterly.  Dividends must be declared as income in the year they are received.
  4. 4. Shares  Issuing shares -Public issue: Shares can be advertised in the press and can be sold directly. This is usually done on the advice of a specialist company called issuing house. -Offer for sale: The shares are sold to the issuing house which then sells them itself to institutions or stockbrokers. -Placing: With this method the shares are sold in blocks of quite large numbers to institutions. Underwriters are people or companies who agree to buy any shares from an issue which are not sold to the public or to institutions. -Rights issue: If a company is successful enough it can often go back to its own shareholders to sell them even more shares. In order to make sure that they buy the shares the company will usually offer the new shares at a cheaper price than the normal shares.
  5. 5. Stocks and Shares  The issuing of shares (GB) or stocks (US) means offering them for sale to the public.  Floating a company or Making a flotation: offering shares or stocks for sale to the public for the first time.  IPO: Initial public offering
  6. 6. Stocks and Shares: Transactions  At the LD Stock Exchange, share transactions do not have to be settled until the account day or settlement day at the end of a two- week period. This allows speculators:  To buy shares hoping to resell them at higher price before they actually pay for them, or  To sell shares, hoping to buy them back at a lower price (Short selling)
  7. 7. Stocks and Shares: Companies  Companies use a bank to underwrite the issue.  Bank guarantees to purchase securities at an agreed price on a certain day.  Companies can raise more money by issuing new shares:  offer a rights issue to existing shareholders at lower market price
  8. 8. Stocks and Shares: Companies  Companies can turn part of their profit into capital by issuing new shares to shareholders in stead of paying dividends.  GB: Bonus issue, script issue, capitalization issue,  US: stock dividend, stock split.
  9. 9. Stocks and Shares: Companies  US corporations are permitted to reduce the amount of their capital by buying back their own shares, known as treasury stock.  The same applied to VN to award key personnel (Sacombank)  In the UK, this is not allowed to protect companies’ creditors.
  10. 10. Stocks and Shares: Markets Primary markets:  Over-the-counter market: small and new companies. (Unlisted securities market). Secondary markets:  Major stock exchanges: companies to fulfill a large number of requirements, e.g. issue independently-audited annual reports.
  11. 11. Stocks and Shares: Shareholder rights  Vote at General Meetings  Receive dividend  Receive part of company’s residual value in case of bankruptcy  Sell their share on the secondary market
  12. 12. Stocks and Shares: Share price  Reflects how well or badly the company is doing,  May differ from its nominal, face, or par value  Share premium (GB) or paid-in surplus (US): the amount of money of shares sold at above their par value
  13. 13. Stocks and Shares: People involved  Institutional investors: pension funds, banks, insurance companies.  Bulls: buy securities, expect their price to rise, so they can resell them before the next settlement day.  Bears: sell securities, hoping to buy them back at a lower price before the next settlement day.
  14. 14. Stocks and Shares: People involved  Stags: buy new share issue, hoping to resell them at a profit (if the issue is over- subscribed).  Stockbrokers: members of stock exchange, provide advice to shareholders.  Market-makers: wholesalers, who guarantee to make a market at all times with brokers.
  15. 15. Stocks and Shares: People involved  In-siders: occupy a position of trust & possess information not known to the public.  in-sider trading is illegal.  Arbitrageurs: buy stakes in companies involved (or expected to be involved) in takeover bids.
  16. 16. Types of Shares  Ordinary shares (Common stock): shares with voting rights.  Participation certificates: shares without voting rights.  Preference shares: receive a fixed dividend which must be paid in full before any dividend is paid on other shares. (interest payments are deductible, dividends are not  companies issue bonds)
  17. 17. Types of Shares  Deferred shares:  do not receive a dividend until other categories of shares have had a dividend,  but might earn a higher dividend if the company does well.  Blue chips: considered to be without risk.  Widely-held stocks: indicators of market performance (barometer / bellwether stocks)
  18. 18. Types of Shares  Growth stock:  Is expected to appreciate in capital value,  Has high purchasing price, and  A low current rate of return.  Defensive stock (income stock): offers good yield but limited chance of a rise or decline in price.  Mutual fund (Unit trust): invest small investor’s money in a wide portfolio of securities
  19. 19. Bonds  Issued by companies, governments and financial institutions when they need to borrow money.  Pay fixed rate of interest, and are repaid after a fixed period, known as their maturity.  Are liquid, can be sold on the secondary market until they mature
  20. 20. Bonds  Above par: a bond whose market value is higher than its face value.  A floating rate bond: the coupon remains the same but the yield will change.  Coupon: amount of interest a bond pays  Yield: coupon payments expressed as a percentage of its price on the secondary market
  21. 21. Bonds  Private ratings companies provide investment grade to bond-issuing companies.  Treasury Bonds (gilts): long-term government bonds  Treasury Bills: short-term instruments with the government sells to and buys from the commercial banks, to regulate the money supply.