Equity shares are irredeemable, but preference shares are redeemable. The next major difference is the ‘right to vote’. In general, equity shares carry the right to vote, although preference shares do not carry voting rights. If in a financial year, dividend on equity shares is not declared and paid, then the dividend for that year lapses. On the other hand, in the same situation, the preference shares dividend gets accumulated which is paid in the next financial year except in the case of non-cumulative preference shares. The rate of dividend is consistent for preference shares, while the rate of equity dividend depends on the amount of profit earned by the company in the financial year. Thus it goes on changing.
Initial Public Offering (IPO) An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors.
IPO Process steps a company must undertake to go public via an IPO process: • Select a bank (Reputation, Expertise, Relationship) • Due diligence and filings • Firm Commitment • Best Efforts Agreement • Syndicate of Underwriters • Pricing • Fixed Price • Book Building • Stabilization
Secondary Public Offering (SPO) A secondary offering is the sale of new or closely held shares by a company that has already made an initial public offering (IPO). There are two types of secondary offerings. A non-dilutive secondary offering is a sale of securities in which one or more major stockholders in a company sell all or a large portion of their holdings . The proceeds from this sale are paid to the stockholders that sell their shares. Meanwhile, a dilutive secondary offering involves creating new shares and offering them for public sale.
Market Risks • Market risk is the possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets in which he or she is involved. Market risk, also called " systematic risk ," cannot be eliminated through diversification, though it can be hedged against in other ways. • Economic Recessions: A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP • Currency risk: The risk that exchange rates will go up or possibly own • Equity risk: The risk that share prices will go up or down • Inflation risk: the potential for inflation to increase the price of all goods and services such that it undermines the value of money • Commodity risk: the possibility of commodity prices such as metals change value dramatically • Interest rate risk: the risk that comes from an increase or decrease in interest rates • Event Risks: FATF, AML, Change in Government Policies • Rating Risks: International Rating agency (Terrorism)
Financial System A 'financial system' is a system that allows the exchange of funds between lenders, investors, and borrowers .
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