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Series 7 > Stocks > Flashcards

Flashcards in Stocks Deck (22):
1

Rights of a stock holder

1. Certificate
2. Vote for board members
3. Limited financial info
4. Preemptive rights (buy new shares at a discount)
5. Share in corporate profits

Have limited liability

2

Voting structure

# of shares held x # of vacancies on board = # of votes

B shares dilute voting power

3

Voting types

1. Statutory - votes divided equally between all candidates

2. Cumulative - votes divided up any way

4

Authorized shares

Shares a company is allowed to issue based on corporate charter

5

Unissued shares

Portion of authorized shares kept by company, shares may be kept by company for up to 2 or 3 yrs (shelf "life" registration)

6

Issued shares

Shares sold to the public

7

Treasury stock

Shares sold to the public that are repurchased by the company.

8

Reasons for treasury stock

1. Avoid hostile takeover
2. Use as bonus for employees
3. Increase demand (price) for existing shares
4. Use as collateral to borrow

No voting power, no divs

9

Outstanding shares

Issued - treasury

10

Stock par value

Price used by company for bookkeeping, arbitrary

11

Stock splits

Make mkt price more attractive, approved by shareholders, does not change % of ownership or value of investment, just may make it easier to buy round lots

3 types: even, reverse, uneven

12

Preferred stock

Par = $100, div is expressed as % of par, paid qtrly, no voting rights

13

Convertible preferred

Can convert preferred to common at any time, usually lower div, conversion price and conversion ratio

Par/conversion price = conversion ratio

14

Callable preferred

Company can buy back, pays higher div

15

Participating preferred

Receive both preferred and common divs

16

Prior (senior) preferred

Preference above other preferred stock in bankruptcy situations

17

Cumulative preferred

Can delay paying full div, but must pay back before common div

18

ADR

American depository receipts - foreign stocks traded in US mkts, issued by foreign branch of US bank, bank sponsored, paid in US dollars, no voting privileges, or preemptive rights, subject to currency risk

19

Warrants

Buy additional shares of stock at fixed price (sweetener), can be traded separately, often carry expirations, usually long term, no voting rights, no divs

20

Rights

Preemptive rights allow investors to maintain proportional ownership when a company issues new shares, purchased directly at a discount, automatically received by common stockholders (not preferred), short term 30 days, can be traded separately.

1 share = 1 right

21

Stand by UW

Buys stock not purchased in rights offering and resells

22

Value of a right

Cum (with) rights:

(Mkt price - discount price)/# of rights for 1 share + 1

Ex (w/o) rights:

(Mkt price - discount price)/# of rights for one share