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Glossary

A
Glossary Items beginning with A
AGM
Annual General Meeting. The annual meeting where shareholders formally approve the director's actions on their behalf during the past financial year and adopt the Annual Report and Accounts. It is also the meeting at which directors may retire and are formally appointed.
AIM
Launched in June 1995 the Alternative Investment Market (AIM) allows companies that cannot or do not wish to meet the full listing requirements to go public. There are more than 1900 companies quoted on AIM. The companies are required to supply less information than is necessary for the full listing and the number of shares available for trading may be fewer.
B
Glossary Items beginning with B
Bear
A person who expects prices of shares, and consequently the value of the Stock Market itself, to fall.
Bid Price
The price in the market which a prospective buyer is prepared to pay (BID) to acquire the share. The lower value of the prices in the Bid to Offer spread. The price received when the shares are sold.
Blue Chip
The largest companies traded on the Stock Exchange. The constituents of the FTSE 100 Index of largest companies. The most highly valued and reputable companies on the Stock Exchange.
Bonds
Bonds & Fixed Interest Bonds are effectively loans made by the government or corporations to fund spending or raise capital. They are issued for a specified redemption value at a fixed date in the future and provide the holder with regular interest payments until that time. The value of a bond will generally depend upon the outlook for inflation and interest rates, as well as the underlying security of the issuer. Bonds issued by the UK Government (T+3 ) are generally regarded as very low risk and are sometimes referred to as ‘gilt edged securities’. Bonds issued by corporations may be less secure and so the issuer may have to pay a higher rate of interest to attract Investor’s capital.
Bonus Issue
The issue of new shares to an existing shareholder, but at no extra cost. A means for the company to distribute historic retained profits to shareholders.
Brokers' Forecast
Brokers estimate the future performance of a company usually based on key indicators: Pre-tax profit, EPS and DPS. Two future year estimates are shown for each company (the current and next financial period). These figures are used to calculate the forecast consensus of all brokers for an individual company.
Bull
A person who expects the price of shares, and consequently the value of the Stock Market itself, to rise.
C
Glossary Items beginning with C
Capital Growth
Where the price of your shares rise in value. Put simply, selling them would result in you having more capital than you had when you originally purchased them.
Company
The separate legal entity in which an investor is able to acquire a share stake, representing his part ownership of a business.
Contract Note
A confirmation document issued to the client recording the details of their dealing transaction including quantity, price, and settlement date.
Covered Warrant
A covered warrant is a derivative issued by a financial institution. It gives the holder the right, but not the obligation, to buy (call) or sell (put) an underlying asset which could be a share or bond or index at a specified strike price during or at the end of a specified time period.
CUM
The normal status for buying the company's shares with all normal rights to future dividends and share issues. Also see EX.
D
Glossary Items beginning with D
Dividend
A company that is making a profit often keeps a portion of its earnings to reinvest in the future of its business. The remaining profits will normally be given back to the owners fo the company, its shareholders, as a dividend payment. The dividend is often paid in two or more instalments over the year. The initial payments are called ‘interim dividends’ and the remainder, paid as the ‘final’ dividend.
E
Glossary Items beginning with E
Earnings
The profit earned by the company during the financial period, which is available to pay dividends. Usually expressed on a per share basis as Earnings per Share (or EPS) and used as the key element of the Price Earnings Ratio (or PER or P/E Ratio) in judging comparative values.
EGM
Extraordinary General Meeting. A meeting of shareholders to discuss and approve special matters proposed by the directors, such as approval of a take-over, or major acquisition.
Equity
The voting capital in the company, represented by the ordinary shares.
EX
Used to indicate that the share is currently available in the market with a lack of certain specific rights and conditions. This might be ex dividend (or XD) where a purchaser is not entitled to the next declared dividend, or ex rights (or XR) where the holder is not able to participate in a proposed new share issue by the company to existing holders on preferential terms. Also see CUM
Exercise
To implement the rights of an option, by buying (in the case of call options) or selling (in the case of put options) the underlying asset.
F
Glossary Items beginning with F
Final Results
The announcement and publication of the company's financial results for its latest business period, or financial year, in the form of the Annual Report and Accounts. See also Prelims.
Flipping
The practice by some institutional investors of buying initial public offerings at the offering price and then reselling them to retail investors once trading has begun, usually for a substantial profit.
Fixed Interest Securities
Securities issued by a company, government (known as T+3 in the UK) or local authority, where the amount of interest to be paid each year is set on issue.
FSA
(Financial Services Authority) An independent non-governmental body, which exercises statutory powers under the Financial Services and Markets Act 2000.
FTSE
Financial Times Stock Exchange Index, publisher of indices. FTSE100 is the Index of the largest 100 companies in the UK by Market Capitalisation and is part of the range of indices.
Fund Manager
A professional investor, typically in an insurance company, pension fund, investment and unit trust.
G
Glossary Items beginning with G
T+3
Loan stock issued and guaranteed by the UK government.
I
Glossary Items beginning with I
In the Money
situation in which an option’s strike price is below the current market price of the underlying (for a call option). A call option on XYZ with a strike price (exercise price) of 10 would be in the money if the underlying was currently 12. A put option on XYZ with a strike price of 10 would be in the money if the underlying was currently 8.
Initial Public Offering
(IPO) The first time a company sells stock to the public. An Initial Public Offering is a type of a primary offering, which occurs whenever a company sells new stock, and differs from a secondary offering, which is the public sale of previously issued securities, usually held by insiders.
Institutional Investor
Entity with large amounts to invest, such as Investment and Unit Trusts, Insurance companies, Pension Funds, Investment Banks and Endowment Funds. Institutional investors are covered by fewer protective regulations because it is assumed that they are more knowledgeable and better able to protect themselves. They account for a majority of overall volume traded and the value of shares held. Also see Fund Manager.
Interim
The results covering part of the company's financial year, usually the first six months, and the dividend paid to shareholders for that period.
Investment Trusts
Companies quoted on the Stock Exchange whose business is managing a portfolio of shares in other UK and worldwide companies and seek the best returns for their investors.
Investor Relations
A department within a public company that distributes information about the company and its financial performance to existing and potential shareholders.
L
Glossary Items beginning with L
Lock In Period
The time period after an IPO when insiders at the newly public company are restricted by the lead underwriter from selling their shares. Usually lasts 180 days.
M
Glossary Items beginning with M
Market Capital
The total Stock Market value of the company's shares, being the total number of shares issued to shareholders multiplied by the current share price.
Market Maker
The Stock Exchange firms that a stockbroker deals with in completing a transaction. The market middleman from whom you buy, or to whom you sell, the shares in the company.
Market Price
The price at which the share can currently be traded in the market.
Market Value
See Market Capital
Merger
The arrangement by which two companies unite without one attaining direct control over the other.
Mid Price
The normal price quoted in the press for the company's shares, being the mid point in the Bid and Offer spread.
N
Glossary Items beginning with M
New Issue
Same as an IPO or placing.
Nominee
A person, or company, in whose name the shares are held, but who holds them on behalf of the actual shareholder. A means of preserving anonymity of the actual shareholder and for institutional investors to centralise the administration or individual holdings of their clients
NPV
No Par Value, being a class of share that does not have a designated face value. See also Par Value.
O
Glossary Items beginning with O
Offer Price
The price in the market which a prospective seller is prepared to accept to sell the shares. The higher of the prices in the Bid to Offer spread. The price paid when you buy the shares and the existing shareholder accepts the OFFER to buy them.
Option
The right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time. For stock options, the amount is usually 100 shares. Also called option contract.
Ordinary Share
The main class of share capital representing the owner's interest in the company.
Oversubscribed
Defines a deal in which investors apply for more shares than are available. Usually a sign that an IPO is a hot deal and will open at a substantial premium.
P
Glossary Items beginning with P
Par Value
The original face value of the company's shares. It has no relevance to either the current share price market value or the asset value.
PER
This expresses the current share price (P) as a multiple of the earnings per share (E). The P/E ratio is used as a measure of how much the investor is being asked to pay for the investment. It is a means of assessing both the value of the company and also its comparative value and attraction compared to other companies.
P/E Ratio or PER
is a calculation used to compare companies, it is calculated by dividing the company share price by its earnings per share.
Preference Shares
Similar to ordinary shares but preference shares normally pay a fixed dividend and rank ahead of ordinary shares for dividend and in a company liquidation.
Prelims
The Preliminary Announcement, being the initial report to the Stock Exchange of the company's financial results for the year.
Premium
The difference between the offer price and opening or current price during a new issue of shares through an IPO or rights issue.
Price Earnings Ratio
See P/E or PER
Private Company
A company whose shares are not traded on the open market. Opposite of public company.
Private Investor
An individual who purchases securities for him/herself, as opposed to an institutional investor. Also called individual, small investor or retail investor.
Prospectus
The document, issued at the time of the initial issue of shares to the public, which explains all aspects of a company's business, including financial results, growth strategy, and risk factors.
Public Company
A company which has shares that investors are able to acquire in the open market.
R
Glossary Items beginning with R
Reverse Take-over
A technique used by a private company to go public without jumping through all the regulatory hoops that going public usually requires. The private company acquires majority ownership in a publicly listed company that has no assets or liabilities (called a shell), changes the company's name, and installs its management and board of directors.
Rights Issue
A means of raising new capital whereby existing shareholders agree to buy new shares at an agreed price, which will normally be at a discount to the current market price.
Road Show
A tour taken by a company preparing for an IPO in order to attract interest in the deal. Attended by institutional investors, analysts, and money managers by invitation only. Members of the media are forbidden.
S
Glossary Items beginning with S
Script Issue
See Bonus Issue
Share
Representing one unit of ownership in a company.
Share Certificate
The document that records the shareholder's stake in the company. An indication of ownership to be returned on the sale of the holding.
Shareholder
A person, institution or company who owns shares in a company or mutual fund. For company shareholders along with the ownership come a right to dividends and the right to vote on certain company matters, including the board of directors. Also called stockholder.
Shell
A company with no real assets or operations.
Spread
The difference between the Bid and Offer prices.
Stock
An instrument that signifies an ownership position, or equity, in a corporation, and represents a claim on its proportionate share in the corporation's assets and profits. Also called equities or equity securities or corporate stock. See also share.
Stock Exchange
A Market on which shares or other securities are bought and sold. Examples include the London Stock Exchange (or LSE) and AIM.
Stockholder
Taking the traditional definition, stockholders are lenders and are accounted among the company's creditors. Interest on stocks must be paid ahead of any dividend to shareholders. Share or equity capital is money permanently supplied in exchange for a stake in the ownership of the business. See also shareholder.
T
Glossary Items beginning with T
Takeover
When one company approaches another company, making an offer to the latter's shareholders, seeking to acquire their shares in sufficient quantities to take control. If the company that is being taken over is listed on the Stock Exchange, a strict protocol of rules and regulations exist to protect the interests of shareholders. A time limit is set for acceptance of the offer. If the company making the offer gains control of 90% or more of the shares, it has a legal right to acquire the remaining 10% of the shares at the offer price. A take-over bid may be friendly, recommended by the board of the company being taken over, or it may be hostile, rejected by the board with the company making the offer going direct to shareholders.
U
Glossary Items beginning with U
Unit Trusts
Open ended investment funds where the money is invested in a greater variety of stocks. Each investor owns a number of units the value of the Fund depends on the value of the assets owned by the trust. Any new investor will be issued newly created units in the trust.
V
Glossary Items beginning with V
Vesting Period
The period of time before shares are owned unconditionally by an employee in an employee stock option plan. If his/her employment terminates before this period ends, the company can buy back the shares at their original price.
W
Glossary Items beginning with W
Warrants
A security that is tradable, and allows the holder the right to subscribe for shares. Client must sign a warrants risk notice before trading. It explains the potential risks of trading in warrants.
Z
Glossary Items beginning with Z
Zero Dividend
A non interest bearing redeemable security issues at a discount to its redemption value.