• Ordinary share
  • right to vote in AGM on mergers, board appointments and raising new share capital
  • rank after all other forms of loan capital and share capital
• Preference shares
  • Debt-like qualities
  • No right to vote
  • Fixed rate dividend payment
  • Paid before ordinary shareholders
  • Often cumulative
  • Participating shares have a right to a proportion of profits if they exceed a certain level
  • Those with conversion rights can be converted into ordinary shares at specified dates
  • Some preference shares have redemption dates.

• Offer for Subscription
  • Issues direct to the public
  • Rare as most companies do not have expertise/resources
• Offer for Sale
  • Issuing house appointed to manage process
• Placing
  • Company sells shares to broker, who then sells them onto his clients.
  • More than one broker - known as intermediaries offer
• Introduction
  • Bringing shares already held by shareholders to the market place.

In relation to Pricing of a New Issue, what 2 ways are there of doing this?

Describe those 2 ways.

• Fixed Price Offer
  • Issuing house establisheds price for stock based on similar shares that are already trading in market place.
  • Offer prices usually artificially low:
    • ensures invester interest
    • ensures immediate uplift of share price
• Tender Offer
  • Investors are required to state price they are willing to pay and number of shares they want.
  • Buyers ranked in order and apportioned accordingly
  • Price is set at point on this list at which the offer is fully subscribed.
    • Final 'strike' price usually below level to facilitate immediate uplift of share price.

• Guarantees a minimum level of proceeds from a share issue as issue process is lengthy and adverse market conditions may occur during the process.
• Underwriting commission paid to underwriters
• Underwriters guarantee to take up any shortfall and to pay agreed price
• No limit to number of underwriters who can participate in underwriting syndicate.

A forum for buying and selling second hand shares within the London Stock Exchange.

• Main market for shares in larger companies
• Alternative Investment Market (AIM) for newer and smaller companies
  • less stringent regulatory requirements

• SETS (Stock Exchange Electronic Trading Service)
  • larger and more liquid stocks (FTSE 100)
  • allows buyers and sellers to trade directly with one another
• SEAQ (Stock Exchange Automated Quotations Sustem)
  • for more illiquid shares
  • 2 way prices for market makers and broker dealers

• A company does not need to list its shares in the contry it is headquartered
  • major stock exchanges provide acces to a larger and wider base of investors
• Equities in developed countries are usually considered less risky than those in emerging markets and display less volatility.
• Implications of currency fluctuations

• Return on Invested Capital
  • profits / capital (equity and debt) required to generate the profit
  • high number and above building society return = may indicate successful company
• Price to Earnings Ratio
  • Price / earnings per share
  • Judged in relation to other companies in the same type of business
  • Higher than peers = overvalued
• Dividend Yield
  • dividend / share price
  • Higher the yield the more attractive the stock
• Price to Book Ratio
  • share price / net book value (shareholders equity) per share