Chapter 4, Equities Flashcards
(16 cards)
What is an initial public offering?
IPO - first time shares are offered to members of the public
What is an IPO?
A general offer make widely available by offering shares to the unconnected third parties
What is a key part of IPO’s?
The issuing company will have its shares subsequently traded on a stock exchange
Summary of initial public offerings?
- Commonly called IPOs
- When a company first makes it shares avaliable to the public
- When the company becomes listed on a stock exchange
What two things provide returns on shares?
- Dividends
- Capital gain
What are dividends?
Regular ongoing income that a shareholder may receive - not fixed
What are dividends driven by?
Management of the company
- Profitability
- Expectation
What is the dividend yield?
When a dividend is expressed as a percentage of the share price
What do equity investors hope?
Their shares will increase in value - make a capital gain
How do shares provide returns to investors?
- Paying regular dividends
- Increasing in value to deliver capital gain
Who own companies?
Equity holders
Who has the right to attend and vote at meetings?
Shareholders
Why are shareholder meetings important?
The company executives don’t own the company, and therefore need to keep the owners updates to be able to make decisions
Summaries company meetings/assemblies?
- Meetings to which all the shareholders are invited
- Generally required to be held at least annually
- Provide the opportunity for the owners of the company (shareholders) to vote on significant matters
What risk do shareholders face?
- That the company does badly - if the company does poorly, it wont be able to pay any dividends to the shareholders
- Value of shares falls to zero (if bankruptcy) shareholders are unlikely to be able to sell their shares and make any capital gain
Who gets their money first in case of a company collapsing?
Lenders - only if anything is left will the shareholders get anything
