New share issues

Companies that require further capital can issue new shares. If these are offered to existing shareholders first this is known as a rights issue - because the current shareholders have the first right to buy them. Companies can also choose to capitalize part of their profit or retained earnings. This means turning their profits into capital by issuing new shares to existing shareholders instead of paying them a dividend. There are various names for this process, including scrip issue, capitalization issue and bonus issue. Companies with surplus cash can also choose to buy back some of their shares on the secondary market. These are then called own shares.

BrE: own shares; AmE: treasury stock

Categories of stocks and shares

Investors tend to classify the stocks and shares available in the equity markets in different categories.

- Blue chips: Stocks in large companies with a reputation for quality, reliability and profitability. More than two-thirds of all blue chips in industrialized countries are owned by institutional investors such as insurance companies and pension funds.

- Growth stocks: Stocks that are expected to regularly rise in value. Most technology companies are growth stocks, and don't pay dividends, so the shareholders' equity or owners' equity increases. This causes the stock price to rise. (See Unit 11)

- Income stocks: Stocks that have a history of paying consistently high dividends.

- Defensive stocks: Stocks that provide a regular dividend and stable earnings, but whose value is not expected to rise or fall very much.

Value stocks: Stocks that investors believe are currently trading for less than they are worth - when compared with the companies' assets.

SHAREHOLDERS (text №14)

Investors

Stock markets are measured by stock indexes (or indices), such as the Dow Jones Industrial Average (DJIA) in New York, and the FTSE 100 index (often called the Footsie) in London. These indexes show changes in the average prices of a selected group of important stocks. There have been several stock market crashes when these indexes have fallen considerably on a single day (e.g. 'Black Monday', 19 October 1987, when the DJIA lost 22.6%).

Financial journalists use some animal names to describe investors:

- bulls are investors who expect prices to rise

- I bears are investors who expect them to fall

- stags are investors who buy new share issues hoping that they will be over-subscribed. This means they hope there will be more demand than available stocks, so the successful buyers can immediately sell their stocks at a profit.

A period when most of the stocks on a market rise is called a bull market. A period when most of them fall in value is a bear market.

Дата добавления: 2015-11-16