MARKET CAPITALIZATION (MARKET CAP)
1. Ongoing market valuation of a public firm with publicly traded shares calculated as outstanding shares held by the shareholders counted times the current per share market price. It is, however, neither
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NEGATIVE PLEDGE CLAUSE
If the company issues stocks or bonds that have a negative effect on the shareholders, the borrower has this specific type of contract or agreement as cover.
STAKEHOLDERS
Anyone with that has a legal, financial or social interest in a company such as shareholders, managers, suppliers, directors, government, employees and the community. Refer to direct stakeholders and indirect stakeholders.
STANDBY AGREEMENT
After preemptive rights are exercised by the shareholders the remaining shares are purchased in agreement with a firm by underwriters of a rights issue guaranteeing the holdings by the firm of the
LEVERAGED RECAPITALIZATION
To make a company less attractive hostile takeover target, it takes on a huge loan and spreads that money among existing shareholders. Also refer to poison pill.
MEMBERS’ VOLUNTARY LIQUIDATION
A solvent firm’s liquidation by a resolution passed for voluntary shutdown of the business by its shareholders who also typically choose and appoint the liquidator. It requires a statutory solvency declaration by
RETURN ON EQUITY (ROE)
The total, unadjusted return generated for shareholders by a firm during an identified period of time. Refer to risk adjusted return on capital.
PIERCING THE CORPORATE VEIL
When shareholders must pay losses from their personal assets. Refer to limited liability.
RIGHTS ISSUE
Giving existing shareholders an opportunity to purchase new stock at current prices with the remaining available stock being sold in the open market at the future rate. AKA privileged subscription issue and
MANAGEMENT RISK
Potential risk tied to company managers’ decisions made in the interest of shareholders and the company at large. Poor decisions or self-serving decisions made by management will potentially destroy shareholder wealth.
PLOWBACK RATIO
The amount of capital reinvested that are not paid to shareholders in the form of dividends.
NET WORTH
Firm’s value to its owners, typically stockholders or shareholders. Value is usually shown on the firm’s balance sheet. Issued share capital plus retained earnings plus capital gains equals net worth. Also known
LIMITED LIABILITY
The legal protection limiting each shareholder to the par value of fully paid-up company shares to cover the financial liability of the company’s debts and obligations in a privately or publicly owned
LIMITED LIABILITY COMPANY (LLC)
US business structure type that is relatively recent. It combines corporation limited personal liability with partnership or sole proprietorship single taxation. Each shareholder files own separate tax return. Profits and tax benefits
PREEMPTIVE RIGHT
A shareholders right at first choice on buying stocks. Any left are available to the market at large. AKA antidilution provision and subscription priviledge. Refer to rights issue.
PREMIUM RAID
When a company quickly buys a block of stock offering a premium to shareholder. Refer to dawn raid or saturday night special.
LIQUIDATING DIVIDEND
A company will issue this type of payment to shareholders if the company is claiming bankruptcy or ceasing business operations. Shareholder company share-count determines a shareholder’s payment amount.
SHORT TENDER
Satisfying the offer to purchase all or some of a shareholders stock by borrowing common stock to pay for the tender offer.
SINGLE BOARD SYSTEM
A corporation that is overseen by one board of directors consisting of 10 to 30 members guided by a chairman (possibly the CEO) who are nominated by internal sources and elected at
NO-LOAD DRIP
Shareholders can reinvest dividends they receive into more shares without any fees in this type of program offered by publicly-held companies. The company directly issues the resulting stock purchased.
