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27 Cards in this Set
- Front
- Back
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What's the deal with the New York Stock Exchange / Euronext?
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NYSE/Euronext have merged to become the world's largest exchange.
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What stock exchanges does Euronext manage?
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Paris, Belgium, Amsterdam, Lisbon, as well as LIFFE.
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What the fuck is LIFFE?
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Shut up, I'm gonna tell you. Life is the London International Financial Futures and Options Exchange, it's a futures exchange based in London.
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What is the DJIA?
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The Dow Jones Industrial Average, a stock market index in the U.S. that tracks 30 large cap U.S. stocks.
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What's the CAC 40?
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A French benchmark index.
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Where is the London Stock Exchange (LSE) located?
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London. You moron.
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What's the deal with LIFFE, EUREX, and CME/CBOT?
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They are all derivative exchanges. LIFFE is part of Euronext, Eurex is part of DeutscheBorse, CME/CBOT is in Chicago and have merged.
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Where is the Deutsche Borse located?
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Frankfurt
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What index tracks the Deutsche Borse?
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The DAX.
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Who did the Deutsche Borse try to merge with twice?
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The London Stock Exchange. (LSE)
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What's the deal with the NASDAQ?
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It was established in 1971 as the world's first fully automated exchange. It has 3,200 companies listed on it. Leader in technology corporations.
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What is the index of the NASDAQ?
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The NASDAQ Composite. And some other indices apparently not important enough to mention.
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What is the leading index of the Tokyo Stock Exchange?
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The Nikkei 225.
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What is the index of the Hong Kong Stock Exchange?
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The Hang Seng.
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What has the European Central Bank been doing with interest rates?
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They have been holding them steady to fight inflation. There has been pressure on them to lower rates to stimulate business.
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What has the U.S. Central Bank done with interest rates?
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They have lowered them to attempt to stimulate economic activity and help the banks recover from subprime crisis and expand available credit.
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What is an IPO?
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An initial public offering (IPO) is the first time sale of equity in a company to the general public, equity never has to be paid back. Generally in the form of shares of common stock underwritten and distributed through an investment banking firm. IPOs are used by both Start-up as well as established companies.
Once issued (distributed) these shares are then traded in the Secondary Market on a recognized stock market or over-the-counter: directly between brokerage firms/investment banks. Stock represents Equity/Ownership with voting rights/possible dividends; bonds are debt/loan on which there are interest payments and the principal must be paid back. |
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Why would a company consider an IPO?
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• A company cannot reasonably expect to raise venture capital from institutional funds or is concerned with intervention from investors; • A company needs to raise more than $5 million whereby finding individual investors can be too time consuming; A company needs a significant amount of permanent capital it won't have to pay back to a bank or other lender;• A company seeks growth through acquisitions, and needs more than cash to attract and close deals.
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What must companies demonstrate to make an IPO sensible?
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They need to demonstrate the potential for future growth.
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What are some of the benefits of an IPO?
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• A public company has direct access to the capital markets and can then raise more capital by issuing additional stock in a secondary offering. Public companies can also more easily raise additional funds privately;
• Public companies can use their common stock to attract and retain good employees; • Being a public company can be more advantageous/prestigious than being a private company; • Going public provides owners and founders an exit option for selling their ownership holdings in the business; • Public companies can be worth more than private companies. For Example: The public companies that compose the Standard & Poor's 500 are valued at about 17 times their earnings (i.e., a company earning $1 million would be worth $17 million), while private companies are typically bought and sold at one to five times cash flow. • Going public can make you rich—at least on paper and for a time!!! • Going public can also enrich your lawyers, accountants and investment bankers that are involved in the process. |
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What are some of the risks of an IPO?
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• Possibility of Loss of Control or Ownership of the company once the shares are in the hands of the public;
• New requirements for reporting, corporate governance, regulatory oversight, public communication, Failure of IPO to sell, |
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What are the steps for a company issuing an IPO?
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First, conduct an organizational meeting. Second, deal with the Registration Statement and file it with the proper regulatory authorities. Third, get clearance in locations where the offering is to be sold. Fourth, address the comments and file amendments to the registration statement. Finally, after the regulatory authorities approve it, the company and the underwriter agree on a final price, distribute the prospectus, and build an order book for potential investors, then they deliver!
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What's the difference between Primary and Secondary Markets?
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A Primary market is when shares of stocks/bonds are issued to the general public in an IPO. The secondary market consists of The day to day trading of shares on the open exchange or over-the-counter after the initial issuance/sale of the shares by the company to the investors.
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What's the difference between the Secondary Market and a Secondary Issue?
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A secondary issue is when a company wants to sell additional stock AFTER the Initial Public Offering, the secondary market is where stocks/bonds are traded after their initial issue.
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What's the definition of a credit spread?
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A measurement of financial reward on debt related to the level of expected risk in getting your money back, calculated in basis points and measured between a Benchmark and the yield on the load/bonds.
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Why is the credit spread important to the underwriter?
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The underwriter advises the client/ issuer/borrower on the cost (credit spread over the Benchmark) to issue the bonds/borrow money.
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What is the importance of the credit spread to the fixed income investor?
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The investor uses the credit spread to determine if there is enough return to justify the risk in buying the bonds/make the loan.
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