A corporate action in which a company buys most, if not all, of the target company’s ownership stakes in order to assume control of the target firm. Acquisitions are often made as part of a company’s growth strategy whereby it is more beneficial to take over an existing firm’s operations and niche compared to expanding on its own. Acquisitions are often paid in cash, the acquiring company’s stock or a combination of both.
Accounting for expenses or charges as applicable rather than as paid. Includes such practices as depreciation, depletion, write-off of intangibles, prepaid expenses and deferred charges.
Everything a corporation owns or that is due to it: cash, investments, money due it, materials and inventories, which are called current assets; buildings and machinery, which are known as fixed assets; and patents and goodwill, called intangible assets. (See: Liabilities)
Someone who believes the market will decline. (See: Bull)
A declining market. (See: Bull market)
The price a buyer is willing to pay for a security. This is one part of the bid with the other being the bid size, which details the amount of shares the investor is willing to purchase at the bid price. The opposite of the bid is the ask price, which is the price a seller is looking to get for his or her shares.
Basically an IOU or promissory note of a corporation, usually issued in multiples of £1,000 or £5,000, although £100 and £500 denominations are not unknown. A bond is evidence of a debt on which the issuing company usually promises to pay the bondholders a specified amount of interest for a specified length of time, and to repay the loan on the expiration date. In every case a bond represents debt – its holder is a creditor of the corporation and not a part owner, as is the shareholder. (See: Collateral, Convertible, Debenture, General mortgage bond, Income bond))
One who believes the market will rise. (See: Bear)
An advancing market. (See: Bear market)
Capital gain or capital loss
Profit or loss from the sale of a capital asset. The capital gains provisions of the tax law are complicated. You should consult your tax advisor for specific information.
The actual piece of paper that is evidence of ownership of stock in a corporation. Watermarked paper is finely engraved with delicate etchings to discourage forgery.
Securities or other property pledged by a borrower to secure repayment of a loan
A bond, debenture or preferred share that may be exchanged by the owner for common stock or another security, usually of the same company, in accordance with the terms of the issue.
Those assets of a company that are reasonably expected to be realized in cash, sold or consumed during one year. These include cash, U.S. Government bonds, receivables and money due usually within one year, as well as inventories.
Money owed and payable by a company, usually within one year.
Current return(See: Yield)
A promissory note backed by the general credit of a company and usually not secured by a mortgage or lien on any specific property. (See: Bond)
Person elected by shareholders to serve on the board of directors. The directors appoint the president, vice presidents, and all other operating officers. Directors decide, among other matters, if and when dividends shall be paid. (See: Proxy)
The amount by which a preferred stock or bond may sell below its par value. Also used as a verb to mean “takes into account” as the price of the stock has discounted the expected dividend cut. (See: Premium)
An account in which the customer gives the broker or someone else discretion to buy and sell securities or commodities, including selection, timing, amount, and price to be paid or received.
Spreading investments among different types of securities and various companies in different fields.
The payment designated by the board of directors to be distributed pro rata among the shares outstanding. On preferred shares, it is generally a fixed amount. On common shares, the dividend varies with the fortunes of the company and the amount of cash on hand, and may be omitted if business is poor or the directors determine to withhold earnings to invest in plant and equipment. Sometimes a company will pay a dividend out of past earnings even if it is not currently operating at a profit
The ownership interest of common and preferred stockholders in a company. Also refers to excess of value of securities over the debit balance in a margin account.
Ex-dividend – A synonym for “without dividend.” The buyer of a stock selling ex-dividend does not receive the recently declared dividend. When stocks go ex-dividend, the stock tables include the symbol “x” following the name. (See: Cash sale, Net change, Transfer)
The value of a bond that appears on the face of the bond, unless the value is otherwise specified by the issuing company. Face value is ordinarily the amount the issuing company promises to pay at maturity. Face value is not an indication of market value. Sometimes referred to as par value. (See: Par)
A corporation’s accounting year. Due to the nature of their particular business, some companies do not use the calendar year for their bookkeeping. A typical example is the department store that finds December 31 too early a date to close its books after the Christmas rush. For that reason many stores wind up their accounting year January 31. The financial year starts 6th April and ends on the 5th of April of the next year.
High-grade bond issued by a company that has demonstrated its ability to earn a comfortable profit over a period of years and pay its bondholders their interest without interruption.
Obligations of the U.k. Government, regarded as the highest grade securities issues
The use of money for the purpose of making more money, to gain income, increase capital, or both.
Also known as an underwriter. The middleman between the corporation issuing new securities and the public. The usual practice is for one or more investment bankers to buy outright from a corporation a new issue of stocks or bonds. The group forms a syndicate to sell the securities to individuals and institutions. Investment bankers also distribute very large blocks of stocks or bonds – perhaps held by an estate. (See: Primary distribution, Syndicate)
A company or trust that uses its capital to invest in other companies. There are two principal types: the closed-end and the open-end, or mutual fund. Shares in closed-end investment companies, some of which are listed on the London Stock Exchange, are readily transferable in the open market and are bought and sold like other shares. Capitalization of these companies remains the same unless action is taken to change, which is seldom. Open-end funds sell their own shares to investors, stand ready to buy back their old shares, and are not listed. Open-end funds are so called because their capitalization is not fixed; they issue more shares as people want them.
One whose principal business consists of acting as investment advisor and rendering investment supervisory services.
IPO (initial public offering)
The first sale of a company’s shares to the public, leading to a stock market listing, known as a flotation in the UK. This is done by listing the shares on a stock exchange of the company’s choosing such as the London Stock Exchange.
The effect on a company when the company has bonds, preferred stock, or both outstanding. Example: If the earnings of a company with 1,000,000 common shares increases from £1,000,000 to £1,500,000, earnings per share would go up from £1 to £1.50, or an increase of 50%. But if earnings of a company that had to pay £500,000 in bond interest increased that much, earnings per common share would jump from £.50 to £1 a share, or 100%.
All the claims against a corporation. Liabilities include accounts, wages and salaries payable; dividends declared payable; accrued taxes payable; and fixed or long-term liabilities, such as mortgage bonds, debentures and bank loans. (See: Assets, Balance sheet)
Limit, limited order, or limited price order
An order to buy or sell a stated amount of a security at a specified price, or at a better price, if obtainable after the order is represented in the trading crowd.
Liquidation – The process of converting securities or other property into cash. The dissolution of a company, with cash remaining after sale of its assets and payment of all indebtedness being distributed to the shareholders.
The ability of the market in a particular security to absorb a reasonable amount of buying or selling at reasonable price changes. Liquidity is one of the most important characteristics of a good market.
The stock of a company that is traded on a securities exchange.
Load – The portion of the offering price of shares of open-end investment companies in excess of the value of the underlying assets. Covers sales commissions and all other costs of distribution. The load is usually incurred only on purchase, there being, in most cases, no charge when the shares are sold (redeemed). (See: Investment company)
Investors are said to be locked in when they have profit on a security they own but do not sell because their profit would immediately become subject to the capital gains tax.
Long – Signifies ownership of securities. “I am long 100 British Gas” means the speaker owns 100 shares. (See: Short position, Short sale)
An illegal operation. Buying or selling a security for the purpose of creating false or misleading appearance of active trading or for the purpose of raising or depressing the price to induce purchase or sale by others.
The amount paid by the customer when using a broker’s credit to buy or sell a security.l
A demand upon a customer to put up money or securities with the broker. The call is made when a purchase is made; also if a customer’s account declines below a minimum standard set by the exchange or by the firm.
An order to buy or sell a stated amount of a security at the most advantageous price obtainable after the order is represented in the trading crowd. (See: Good ’til canceled order, Limit order, Stop order)
The last reported price at which the stock or bond sold, or the current quote. (See: Quote)
Maturity – The date on which a loan or bond comes due and is to be paid off
Refers to a security, the title to which is transferable by delivery.
Net asset value
Usually used in connection with investment companies to mean net asset value per share. An investment company computes its assets daily, or even twice daily, by totaling the market value of all securities owned. All liabilities are deducted, and the balance is divided by the number of shares outstanding. The resulting figure is the net asset value per share. (See: Assets, Investment company)
The change in the price of a security from the closing price on one day to the closing price the next day on which the stock is traded. The net change is ordinarily the last figure in the newspaper stock price list. The mark +1 1/8 means up £1.125 a share from the last sale on the previous day the stock traded.
A stock or bond sold by a corporation for the first time. Proceeds may be used to retire outstanding securities of the company, for new plant or equipment, for additional working capital, or to acquire a public ownership interest in the company for private owners.
A type of preferred stock on which unpaid dividends do not accrue.
The price at which a person is ready to sell. Opposed to bid, the price at which one is ready to buy offering The issue or sale of a security by a company. It is often used in reference to an initial public offering (IPO) when a company’s stock is made available for purchase by the public but it can also be used in the context of a bond issue.
Latin phrase meaning “equal footing” that describes situations where two or more assets, securities, creditors or obligations are equally managed without any display of preference. An example of pari-passu occurs during bankruptcy proceedings when a verdict is reached, all creditors can be regarded equally, and will be repaid at the same time and at the same fractional amount as all other creditors. Treating all parties the same means they are pari-passu.
When a portion of an initial public offering (IPO) is placed with private investors right before the IPO is scheduled to hit the market. Typically, these private investors in a pre-IPO placement are large private equity or hedge funds that are willing to buy a large stake in the company. The size of the investment means the price paid for shares in a pre-IPO placement is usually less than the prospective IPO price.
Paper profit (loss)
An unrealized profit or loss on a security still held. Paper profits and losses become realized only when the security is sold. (See: Profit-taking
Holdings of securities by an individual or institution. A portfolio may contain bonds, preferred stocks, common stocks and other securities
A class of stock with a claim on the company’s earnings before payment may be made on the common stock and usually entitled to priority over common stock if the company liquidates. Usually entitled to dividends at a specified rate – when declared by the board of directors and before payment of a dividend on the common stock – depending upon the terms of the issue. (See: Cumulative preferred, Participating preferred
The amount by which a bond or preferred stock may sell above its par value. May refer, also, to redemption price of a bond or preferred stock if it is higher than face value.
A popular way to compare stocks selling at various price levels. The P/E ratio is the price of a share of stock divided by earnings per share for a 12-month period. For example, a stock selling for $50 a share and earning $5 a share is said to be selling at a price-to-earnings ratio of 10.
Also called primary or initial public offering. The original sale of a company’s securities. (See: Investment banker)
The lowest interest rate charged by commercial banks to their most credit-worthy customers; other interest rates, such as personal, automobile, commercial and financing loans are often pegged to the prime.
The person for whom a broker executes an order, or dealers buying or selling for their own accounts. The term “principal” may also refer to a person’s capital or to the face amount of a bond.
Profit-taking – Selling stock that has appreciated in value since purchase, in order to realize the profit. The term is often used to explain a downturn in the market following a period of rising prices. (See: Paper profit)
The official selling circular that must be given to purchasers of new securities registered with the Securities and Exchange Commission. It highlights the much longer Registration Statement file with the Commission.
Written authorization given by a shareholder to someone else to represent him or her and vote his or her shares at a shareholders meeting.
Information given to stockholders in conjunction with the solicitation of proxies
The price at which a bond may be redeemed before maturity, at the option of the issuing company. Redemption value also applies to the price the company must pay to call in certain types of preferred stock. (See: Callable)
When a company wants to raise more funds by issuing additional securities, it may give its stockholders the opportunity, ahead of others, to buy the new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right. Because the additional stock is usually offered to stockholders below the current market price, rights ordinarily have a market value of their own and are actively traded. In most cases they must be exercised within a relatively short period. Failure to exercise or sell rights may result in monetary loss to the holder. (See: Warrants
An issue that matures in part at periodic stated intervals.
Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivers securities sold and receives from the broker the proceeds of a sale. (See: Regular way delivery, Cash sale)
Buying stock to return stock previously borrowed to make delivery on a short sale.
A transaction by a person who believes a security will decline and sells it, though the person does not own any. For instance: You instruct your broker to sell short 100 shares of XYZ. Your broker borrows the stock so delivery can be made to the buyer. The money value of the shares borrowed is deposited by your broker with the lender. Sooner or later you must cover your short sale by buying the same amount of stock you borrowed for return to the lender. If you are able to buy XYZ at a lower price than you sold it for, your profit is the difference between the two prices – not counting commissions and taxes. But if you have to pay more for the stock than the price you received, that is the amount of your loss. Stock exchange and federal regulations govern and limit the conditions under which a short sale may be made on a national securities exchange. Sometimes people will sell short a stock they already own in order to protect a paper profit. This is know as selling short against the box.
Money regularly set aside by a company to redeem its bonds, debentures or preferred stock from time to time as specified in the indenture or charter
(See: Capital stock, Common stock, Preferred stock)
An organized marketplace for securities featured by the centralization of supply and demand for the transaction of orders by member brokers for institutional and individual investors. (See: New York Stock Exchange)
A dividend paid in securities rather than in cash. The dividend may be additional shares of the issuing company, or in shares of another company (usually a subsidiary) held by the company.
Stockholder of record
A stockholder whose name is registered on the books of the issuing corporation. (See: Registrar)
Stock index futures
Futures contracts based on market indexes, e.g. NYSE Composite Index Futures Contracts.
A public offer to buy shares from existing stockholders of one public corporation by another public corporation under specified terms good for a certain time period. Stockholders are asked to “tender” (surrender) their holdings for stated value, usually at a premium above current market price, subject to the tendering of a minimum and maximum number of shares
The number of shares or contracts traded in a security or an entire market during a given period. Volume is usually considered on a daily basis and a daily average is computed for longer periods.
Common stockholders’ right to vote their stock in affairs of a company. Preferred stock usually has the right to vote when preferred dividends are in default for a specified period. The right to vote may be delegated by the stockholder to another person. (See: Cumulative voting, Proxy)
Certificates giving the holder the right to purchase securities at a stipulated price within a specified time limit or perpetually. Sometimes a warrant is offered with securities as an inducement to buy. (See: Rights)
A short form of “when, as and if issued.” The term indicates a conditional transaction in a security authorized for issuance but not as yet actually issued. All “when issued” transactions are on an “if” basis, to be settled if and when the actual security is issued and the exchange or National Association of Securities Dealers rules the transactions are to be settled.
Theoretically, ownership of 51% of a company’s voting stock is necessary to exercise control. In practice – and this is particularly true in the case of a large corporation – effective control sometimes can be exerted through ownership, individually or by a group acting in concert, of less than 50%.
Also known as return. The dividends or interest paid by a company expressed as a percentage of the current price. A stock with a current market value of $40 a share paying dividends at the rate of $3.20 is said to return 8% ($3.20÷$40.00). The current yield on a bond is figured the same way.
Yield to maturity – The yield of a bond to maturity takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.
Zero coupon bond
A bond that pays no interest but is priced, at issue, at a discount from its redemption price.