STOCKS AND
STOCK MARKET
Vypracovala:
Zuzana Kunzová
STOCKS (SHARES)
- A stock or share is an investment instrument
- It si a security issued by a joint stock company in order to
acquire capital for its establishment or further development.
- Stock and shares are certificates representing part ownership
of a company.
- The people who own them and invest to the company are
called stockholder and shareholders.
THE RIGHT OF STOCKHOLDERS
-
the right to participate in the profits of the company in the form
of a dividend,
-
the right to participate in and vote at a General Meeting of the
shareholders (Board of director)
-
the right to participate in the liquidation balance of the
company in case of its liquidation.
- Stockholders also have the right to subscribe to new stocks
when the stock capital of the company increases and in
some cases they have the right to purchase the stocks of
join-stock companies where established by law (take-over
bid).
- Dividends are payments made by a corporation to its
shareholder members. It is the portion of corporate
profits paid out to stockholders.
- The amount of the payment depends on company
financial and investment strategies and the right to a
dividend is provided to each stockholder so long as the
stock or stocks are owned on the decisive day for the
payment of dividends.
- The price of the stocks generally falls the next day by the
net amount of the paid dividend.
- The strength of this ownership right depends on the
amount of stocks owned by an investor towards the total
number of issued stocks.
- The rights and obligationts of stockholders is contained in
Commercial Code.
TYPES OF SHARES
According to physical form:
• Letter stocks 
the paper document
• Registered stocks  entry in the register, only electronic form
According to form:
• Non-bearer stocks
• This are issued in the name of a person
• In paper form, the stocks are transferred by endorsement and its
physical delivery.
• Registered stocks are transferred by contratc and registration
according to law.
• The joint stock company has a evidence of stockholders.
• Bearer stocks
• This stock are free transferable, only by physical delivery.
According to type:
• Common stock = ordinary share
• It is a basic typ of stock,
• This stock don‘t have a special rights.
• Preference stock = priority share
• provide their owners with some exclusive rights, such as
drawing on a guaranteed dividend.
• owners of such shares, however, are not entitled to vote at the
General Meeting.
• Employee stock
• This stock are always as non-bearer stock
• The owner these stocks can be only the emploee of joint stock
company
• Employee stocks are issued for discounted price and as a
motivation
STOCK MARKET
-
-
The place where the stock and share we
can bought and sold are called stock market or stock exchange
The stock market or equity market is a public entity for the trading of
company stock and derivates at an agreed price.
Some exchanges are physical locations, where transactions are
carried out on a trading floor, by a method known as open outcry.
This type of auction is used in stock exchanges and commodity
exchanges where traders may enter "verbal" bids and offers
simultaneously and the use of hand signals.
The other type of stock exchange is a virtual kind, composed of a
network of computers where trades are made electronically via
traders.
STOCK MARKET
-
Actual trades are based on an auction market model where a
potential buyer bids a specific price for a stock and a potential
seller asks a specific price for the stock. (Buying or selling at
market means you will accept any ask price or bid price for the
stock, respectively.) When the bid and ask prices match, a sale
takes place, on a first-come-first-served basis if there are multiple
bidders or askers at a given price.
STOCK MARKET
-
The purpose of a stock exchange is to facilitate the exchange of
securities between buyers and sellers, thus providing a
marketplace (virtual or real). The exchanges provide real-time
trading information on the listed securities, facilitating price
discovery.
-
The stock market is one of the most important sources for
companies to raise money. This allows businesses to be publicly
traded, or raise additional financial capital for expansion by selling
shares of ownership of the company in a public market.
-
The liquidity that an exchange affords the investors gives them the
ability to quickly and easily sell securities.
-
For selected stock listings, liquidity is secured by market makers
who guarantee investors the possibility of continually buying and
selling the issue in question.
STOCK MARKET INDEX
-
The movements of the prices in a market or section of a market
are captured in price indices called stock market indices, of
which there are many, e.g., the S&P, the FTSE and the Euronext
indices.
-
Such indices are usually market capitalization weighted, with
the weights reflecting the contribution of the stock to the index.
The constituents of the index are reviewed frequently to
include/exclude stocks in order to reflect the changing
business environment.
EXAMPLE OF STOCK
EXCHANGE
-
The New York Stock Exchange (NYSE) is a physical exchange,
also referred to as a listed exchange – only stocks listed with
the exchange may be traded, with a hybrid market for placing
orders both electronically and manually on the trading floor.
-
The NASDAQ is a virtual listed exchange, where all of the
trading is done over a computer network. The process is similar
to the New York Stock Exchange. However, buyers and sellers
are electronically matched.
-
Euronext N.V. is a European electronic stock exchange based in
Amsterdam, Netherlands
-
the Euronext group provides clearing and information services
MARKET PARTICIPANTS
Market participants include:
- individual retail investors,
- institutional investors such as mutual funds, banks,
insurance companies and hedge funds,
- and also publicly traded corporations trading in their own
shares.
When the shares are issued for the first time, they are traded in
primary market.
Secondary market is a market on which shares can be re-sold.
-
The nominal value of share – the price written on it – is rarely
the same as its market price.
-
The market price is traded in the stock exchange and this can
change every minute, because it depends on supply and
demand.
-
Some markets have market makers, who are traders who qoute
bid and offer prices.
-
The spread or difference of these price is profit or mark-up of
market makers.
GO PUBLIC …
-
When successful existing company wants to expand it decides
to go public.
-
It is means change form a private company to a public limited
company by selling shares to outside investors for the first
time.
-
Then the company gets advice from investment bank about
how many shares to offer and what price.
-
The company get independent a due diligence, which is
examination of a company and its financial situation.
-
The company produces a prospectus, which is document
explains terms of sale and giving information about the
company and financial result form previous year.
-
The company makes a flotation or IPO – an offer of company’s
shares to investor.
THE POINTS FOR DISCUSSION
 Why the existing company decide to go public?
 Which rights have the stockholders?
 Do you know some investment strategy?
 Who secure the liquidity of stock
in the market?