Professional Documents
Culture Documents
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Market Price
Call Price
Put Price
Private Equity
Depository Receipts
Convertible Preferred
Shares
48.a
Common Shares
Statutory Voting
Cumulative Voting
Preference Shares
Cumulative
Non-Cumulative
Participating Preference
Shares
Cumulative dividends
paid before common
shareholders dividend.
Dividends dont
accumulate when not
paid.
Dividends must be paid
before being paid
common shareholders.
Non-Participating
Preference Shares
Convertible Preference
Shares
48.a
Types
Convertible Preference Shares
48.b
Firm may have different classes of common stock.
Classes may be treated differently with respect to voting power,
seniority, dividends, stock splits & other transactions with
shareholders.
Company filings with regulators contain information regarding
ownership & voting rights of different classes.
48.c
Private equity securities usually issued via private placements.
Private markets are smaller than public markets.
Characteristics of PE: (compared to public equity).
Less liquid & share price is not determined in market.
Limited financial disclosure & lower reporting costs.
Potentially weaker corporate governance.
Greater ability to focus on long-term prospects (no public pressure) &
potentially greater return for investors.
Venture Capital
Direct Investing
Investing in the equity of companies outside of investors local market.
Obstacles:
Investments & returns are denominated in foreign currency.
Foreign stock exchange may be illiquid & may have less strict
reporting requirements.
Investors must be familiar with regulations & procedures of market
in which they invest.
Depository Receipts
Types
Sponsored DR
Equity issuing firm is involved
in the issue of receipts.
Provide voting rights to
investors & subject to greater
disclosure.
Unsponsored DR
Firm is not involved.
Depository bank retains the
voting rights.
Trading location
SEC registration
required
Ability to raise
capital in U.S.
Firm listing fees
Level I
Over-thecounter(OTC)
Level III
NYSE,
Nasdaq, or
AMEX
Yes
Rule 144A
Private
Yes
Level II
NYSE,
Nasdaq, or
AMEX
Yes
No
No
Yes
Yes
Low
High
High
Low
No
Equity Securities
Returns
Risks
48.f
Equity capital to purchase long-term
assets, equipment & expansion into new
businesses or geographic areas etc.
Publicly traded securities provide liquidity.
48.g
48.h
Equity Securities
BV of Equity
MV of Equity
=
= (
)
Alternatively
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First method is more appropriate when it is an industry convention to use average book values or BV is volatile.
Latter method is appropriate when examining ROE for a no. of years or when BV is stable.
ROE is generally viewed as positive for firm (reason for an should be examined e.g BV is rapidly than NI, ROE will
but not favorable).
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Firms anticipated future growth, ratio.
Firms with () are considered value (growth) stocks.