STOCKS AND SHARES
EQUITY FINANCE
EQUITY/EQUITIES
 common stock (the US)
 ordinary shares (the UK)
FORMING LIMITED COMPANIES
(COMPANIES GO PUBLIC)
1. legal entity separate from its owners
2. liable for the amount of capital invested
3. public limited company/listed company apply to:
- over-the-counter markets
- major stock exchanges
GOING PUBLIC
ADVICE FROM AN
INVESTMENT BANK HOW MANY
SHARES AND AT WHAT PRICE
INDEPENDENT ACCOUNTANTS
PRODUCE A DUE DILIGENCE
REPORT
PROSPECTUS ABOUT ITS
FINANCIAL POSITION AND
THE RESULTS
FLOTATION OR IPO
INVESTMENT BANK
UNDERWRITES THE STOCK ISSUE
COMPANIES ISSUE SHARES
raise capital
expand the business
INITIAL PUBLIC OFFERING
IPO (the US)
flotation (the UK)

investment bank underwrites the issue
(guarantees to find buyers and
purchase all the securities if there
are not enough other buyers)
IPO
1. IPO (quick and easy profit)

shares offered through advertising

issue of prospectus

application forms
a) fixed price
b) tender offer – investors bid for
shares
SHAREHOLDERS
Share capital
Dividends
COMPANY
Repayments
and interest
Loans
LENDERS
STOCK EXCHANGE
the primary market (issuing shares)
the secondary market (trading shares)
a) computerized trading systems
b) market makers – traders in stocks
(quote bid - buying prices
offer - selling prices)
STOCK INDEXES
 measure stock markets
 show changes in the average prices
of a selected group of important
stocks
 the Footsie – the FT 100 share Index
 the Dow Jones – 30 large companies
BULL MARKET
 A period during which most stocks
and the stock index are rising
BEAR MARKET
 A period during which most stocks
and the stock index are falling
NOMINAL VALUE OF SHARES
(FACE OR PAR VALUE)
a) nominal value – the price written on it
b) the current market value
(rarely the same)
PEOPLE BUY SHARES
1. part of the ownership
2. proportion of a company’s profits as
a dividend
3. make a capital gain by selling their
shares at a higher price
PROFITS
 pay annual dividends
 keep the profits
the value of the
stocks rises
TRUE OR FALSE?
1.
2.
3.
4.
5.
6.
A company can only be floated once.___
Banks underwrite share issues when they want to buy
the shares. _____
It is easier for a company to be quoted on an unlisted
securities market than on a major stock exchange.
________
Unlisted companies do not publish annual reports.
________
The market price of a share is never the same as its
nominal value. _______
If a company issues new shares, it has to offer them to
existing shareholders at a reduced price.
ADD APPROPRIATE WORDS:
1. Offering shares to the public for the first time is called
................................a company.
2. A company offering shares usually uses a merchant bank
to............................... the issue.
3. The major British companies are ..............................on
the London Stock Exchange.
4. The value written on a share is its ................................
MAKE WORD COMBINATIONS:
1.
2.
3.
4.
go _________________
offer _______________
produce _____________
underwrite ___________
a) an issue
b) a prospectus
c) public
d) shares
USE THE WORD COMBINATIONS TO USE THE WORD
COMBINATIONS TO COMPLETE THE SENTENCES:
We are planning to ____________and that is why we’re
______________50,000 ______for sale. An agency has
______________for us, and the MWE investment bank is
___________________the _________.
http://www.investopedia.com/video/play/what-are-stocks
What is a stock?
What does a stockholder have a claim on?
When does a share increase in value?