2.1 - asset classes: equity

what does stock mean in the US

share

what does loan stock mean in the UK

a type of unsecured bond

what is common stock

aka ordinary shares:

the most simple kind of equity

ordinary shares dividends

variable —> change year on year depending on company performance

non-contractual —> don’t have to pay them

low priority —> ranks after creditors, bonds + preference shares (paid with what’s leftover after paying all these ppl)

ordinary shares voting rights

sometimes restricted or differing —> depends on class of share that determines strength of voting rights

can exercise voting rights at both AGMs and EGMs (annual and extraordinary general meetings)

difference between AGM + EGM

a = normal company biz

e = other stuff that’s more one off

what do ordinary shares have that is important for releasing them on primary markets

nominal value —> the minimum face value amount that people must be charged for the share

does nominal value apply on secondary markets

no

what types of securities (bearer or registered) are ordinary shares

registered

what is preferred stock

aka preference shares - another type of shares ranked higher in priority than ordinary shares

preference shares dividends

fixed —> set at a certain % of nominal value

non-contractual

higher priority —> ranked below creditors + bondholders but above ordinary shares

preference shares voting rights

non-voting

UNLESS there haven’t been dividends in years so they might issue voting rights just to keep shareholders happy

5 types of preference share

cumulative

redeemable

participating

convertible

zero-coupon

cumulative preference share

u r paid any unpaid dividends from previous years

(non-cumulative would just never be paid those unpaid ones)

redeemable preference share

the company is able to buy back the shares from the shareholder at an agreed price in the future

participating preference share

add to fixed dividend if the company is v successful that year and ordinary shares actually happen to get more than preference because of their variable dividend

so like now they can almost pretty much match

convertible shares

right but not obligation to convert them to ordinary shares so u can get voting rights

zero coupon preference shares

pay no dividend but redeem at a price above what u paid for them

holders of ‘A’ rated ordinary shares are usually excluded from…

…voting at meetings