Asset Classes: Equities

Question 1

what is authorised share capital

Answer 1

the maximum amount of capital that can be raised through share issue

Question 2

what is issued share capital

Answer 2

the number of shares the company has allotted to shareholders

Question 3

nominal value of share definition

Answer 3

the fixed legal value of a share

Question 4

who are considered in free float

Answer 4

all shares held by investors other than:

owners holding 5% or more of all shares
restricted stocks
insider holdings

Question 5

can pref shares vote

Answer 5

no

Question 6

what type of dividends do preferred shares have

Answer 6

fixed % of nominal value

Question 7

what are the three special features of ordinary shares

Answer 7

A shares / B shares (i.e. different classes)

Redeemable - company can buy back (as long as non redeemable ones are also in issue)

Partly paid - company may not demand full nominal value at issue

Question 8

what are the 4 special features of preferred shares (no explanations)

Answer 8

cumulative

participating

convertible

redeemable

Question 9

what does cumulative mean wrt preference shares

Answer 9

the right to receive the dividend is rolled over into next period (i.e. div is cumulative if not paid one year onto the next)

Question 10

what does participating mean wrt preference shares

Answer 10

opportunity for further dividend (if wants to gain exposure to ords dividends)

Question 11

what does convertible mean wrt preference shares

Answer 11

the right to convert into ordinary shares

Question 12

what is a zero dividend preference share

Answer 12

pay no income, redeemed by the shareholder above the price at which the share was issued

Question 13

are ADRs registered or bearer

Answer 13

bearer documents

Question 14

ADR settlement

Answer 14

T+2

Question 15

what do ADR holders receive in a rights issue

Answer 15

cash

Question 16

what do ADR holders receive in a bonus issue

Answer 16

alters the number of shares

Question 17

what denomination and dividend currency to ADRs have

Answer 17

USD

Question 18

what are the grey-market /pre-release rules on timings for ADRs and what does it mean

Answer 18

3 months

ADR can be issued secured by cash collateral rather than deposited securities

Question 19

can depositary receipt holders vote

Answer 19

yes

Question 20

usual denomination for Global Depositary Receipts

Answer 20

USD or Euro

Question 21

what risk do ADRs have

Answer 21

FX risk

Question 22

what is a warrant

Answer 22

the right to subscribe for new shares from a company at a fixed price on a future date

Question 23

what is a warrant NOT part of

Answer 23

ordinary share capital of company

Question 24

how are warrants typically issued (2 ways)

Answer 24

as a sweetner with other investments e.g. corporate debt

detachable or non-detachable

Question 25

formula to work out the conversion premium

Answer 25

conversion premium = warrant price + exercise price - current share price

Question 26

difference between warrant and option

Answer 26

on exercise, warrant creates new shares whereas options and covered warrants are exercised into existing shares

Question 27

what is a covered warrant

Answer 27

warrant but issued by an investment bank, which gives right to buy OR sell EXISTING SHARES instead of BUY new issued shares only

Question 28

typical maturity of a covered warrant vs a warrant

Answer 28

warrant over 1 year covered warrant sub 1 year

Question 29

difference in settlement between warrant vs covered warrant

Answer 29

warrants are only physically settled, covered warrant can also be cash settled

Question 30

where are warrants traded

Answer 30

LSE/OTC

Question 31

where are covered warrants traded

Answer 31

LSE

Question 32

do warrants get dividends or voting rights

Answer 32

no