Some of the terms used on the stock exchange
Agio
The amount by which the new issue of securities exceeds the issue price
of the principal amount.
Share stock
The share is a document that securitizes the holder’s claim for a
specific fraction of the total assets of the share stock of a company.
The rights of shareholders are protected by the provisions of the
Companies Act.
Share Stock Analysis
To facilitate the investment decision for investors, share stock, share
stock companies and stock markets are analyzed by experts. Tasks of the
share stock analysis are on the one hand the generation of information
the on other hand the compilation of a prognosis. The fundamental
analysis uses the evaluation of critical business data to access a share
stock whereby also taking into account social economic variables, such
as new orders intakes, wage developments and exchange rates. Chart
analysis refers to a method of analysis of the price development of a
share stock or group of stocks of shares, whereby the course of the
market value is represented graphically and certain developments
(patterns, trends) are consequently easier to discern.
Bond
The bond belongs similarly to the debenture bond, the industry
obligation or communal obligation to the interest-bearing securities. A
bond securitizes the rights of a creditor. Mostly it guarantees the
holder constant interest rates and the repayment of a specific sum.
Arbitrage
One practices arbitrage, when one exploits the price differences that
concomitantly exist on several stock exchanges. A share stock, bonds or
even foreign exchange unit is bought, where it can currently be fetched
at the cheapest value, and sold at the same moment at a higher rate on
another stock exchange. Course differences and course fluctuations are
held within limits due to arbitrage transactions.
Supervisory and Executive Board
At the head of the management of a company are its supervisory board and
executive board. The supervisory board appoints the executive board that
monitors and advises it on the management of the company. The executive
board directs the day-to-day management of the company.
Bear market
Stronger, usually prolonged course decline on the stock market.
Employee Share
Increasingly more companies offer their employees the option of
purchasing stock of the company. The purchase price is usually below the
market price. Employee shares have the same rights as other shares. In
case one want to take advantage of tax benefits claims, the employee
shares must be temporarily fixed, i.e. they may only be sold at a loss
of the benefits before the end of the expiry period.
Bonus shares
These are issued when a share company converts open reserves into
principal capital that is subject to dividend claims. The own capital of
the company is thereby not altered, so that the participation of a
shareholder remains the same, but is nevertheless spread over a larger
number of shares.
Subscription right
The right of a shareholder to acquire the new (= "young") shares of the
company in the event of a capital increase. The shareholders may choose
not to exercise its subscription rights and instead and sell the
subscription rights on the stock exchange.
Bonus
In addition to granting special dividend payment to shareholders.
Possible occasions: anniversary celebrations, special income.
Stock Exchange (Germany)
The stock exchange is the market for securities, shares and bonds
(market fixed income securities). The German stock exchanges are subject
to government supervision. The stock market is divided into several
sub-markets, also called market segments.
1. Official Market
This market places the highest standards on companies seeking capital.
For IPOs, a detailed prospectus with full details of the company is
required. In addition, interim reports as well as annual balance sheet
must be published in an official stock exchange gazette. The fixing of
the course price is done by the official stock exchange course broker.
The clients have a right to have the orders carried out at the
determined course price. Most transactions are executed over this
market.
2. Regulated Market
The regulated market offers companies in comparison to the official
market an easier access to the stock exchange market. The public
offering prospectus can at times be shorter. The publishing obligation
does not necessarily have to be conducted over the press of the stock
exchange, but can also be presented for inspection at the counters of
credit institutes. Through these and other facilitations, mainly
medium-sized companies should be given cost-saving opportunities of
going public. The trade on the regulated market follows the same rules
as the trade on the official market.
3. Free trade market
Here such securities are traded that neither permitted on the official
market nor on the regulated market. The inclusion of the free trade
market takes place on the various stock exchanges at the request of a
credit institute. The perquisite is that a proper trading should be
assumed. Prices are determined by special brokers and published each
trading day of the stock exchange.
Brokerage
Fee of the course broker for services in the securities business.
Depot
An establishment of credit institutions to manage securities for their
customers. Securities may be separately stored in a wrapper (Wrapper
depot) or with the consent of the customers by a securities depository
bank (collective custody account). The latter is the common and less
expensive form. In both cases, the customer deposits are held separately
from the own resources of the Bank and not subject to the claims of
creditors of the bank.
Dividend
Each shareholder is entitled to a part of the annual distributed profit
of a company that corresponds to the amount of shares he holds. This
part of the profit is called dividend.
Effects
Term for securities that are capable of being traded on the stock
exchange.
Nominal capital
The capital established in the statutes of a joint stock company. The
Statute also specifies into how many shares the nominal capital is
divided. The amount of nominal capital is the basis for the amount of
shares the company issues.
Annual General Meeting
At least once a year, the shareholders of a company convene for AGM.
This elects the Supervisory Board and the auditor, may adopt decisions
on the use of the reported net profit, on measures to raise capital, the
articles of association and other fundamental questions. It relieves the
Supervisory Board and the Executive Board.
Bull market
Stronger, usually prolonged persistent price increase on the stock
exchange.
Index
Indicator that expresses changes in certain variables and as such makes
comparisons, particularly of value or price changes possible. A stock
index reflects the price development of an industry or a national
market. For the German stock market, indices are inter alia calculated
by the Deutsche Stock exchange AG, a few banks and various newspapers.
The best known index in Germany is the German stock index DAX.
XETRA (Exchange Electronic Trading)
As of late 1997, the German stock exchange AG, introduced an electronic
system for cross-border securities trading, the XETRA. In the European
environment, indices of the Stoxx 50 or Euro Stoxx 50 have the greatest
significance. These indices represent the 50 largest listed companies in
Europe or the euro zone. Worldwide, the greatest significance is
attributed to the Dow Jones index, in which the 30 largest U.S.
companies are represented.
Insider
Term used on the stock market to refer to people who by virtue of their
professional status have an information advantage. The exploitation of
this information edge to its own advantage by securities transactions is
prohibited, violations may be lead to imprisonment and / or cash fines
of significant amounts.
Mutual fund shares
Term for shares, which represent securitized participation in the assets
of an investment fund. These assets include besides bank accounts in
particular securities in a wide dispersion, this means depending on the
type of fund fixed-income securities or shares. Mutual fund shares are
not traded on stock exchanges, but are calculated from the daily stock
market prices of the entailed values.
Backstage
Professional securities trade of brokers and credit institutions when
they participate in stock market on their own account.
Coupon
Special security paper, also called a dividend certificate that forms
part of a share and against which the dividend paid on its submission.
The interest certificates that accompany securities are also called
coupons.
Price-Earnings Ratio (PER)
Market price of shares (e.g. 100, - €), divided by the earnings per
share (e.g. 10, - €). The price-earnings ratio would, in this case, ten
fold or in short: 10. A lower price-earnings ratio means an accordingly
lower stock market valuation.
Market course value
The price of the shares is determined by supply and
demand on the stock market. The current stock market price is called the
course price.
Limiting
The fixing of a price limit by the purchase or sale orders of
securities.
Jacket and bow
Each share certificate also called stock certificate (Jacket) has a bow
with 10 or 20 dividend coupons and a renewal form (Talon), the entails
the right to buy a new bow. The dividend is payable to the shareholder
directly from the company, but typically over a credit institution upon
presentation of each due dividend note.
Nominal value
Each share has a specific amount in € or U.S. $ or other currency
printed on it, which is its nominal value, with the exception of the quota
share, which is traded without a nominal value, but rather on a volume basis.
The smallest nominal value of one share in Germany since 1.1.1999 is exactly
1, - €.
Option
This refers on the stock exchange to the right to purchase upon
payment of a premium within an agreed period, to purchase or sell securities
(equities or bonds) at a pre-specified.
Warrants bonds
Securities that over a fixed period give the holder in addition to a
fixed interest rate, the (option) right to the subscription of shares of
the respective company. Subscription price and subscription ratio for
the stock are set before the warrant bonds are issued. After exercising
the subscription rights or separation of the option rights remains the
warrant bonds continue to exist as ordinary bonds until repaid. Bonds
with warrant certificates can also be offered that entitle the holder to
subscribe for additional bonds.
Subscription Warrants
The securitized right issued with the warrant bond to subscribe for
shares or bonds. Subscription warrants can be traded separately from the
warrant bond on a stock exchange. The purchase of a subscription warrant
already allows an investor to participate in the exploitation of the
upside potential of the stock in spite of his limited contribution, his
losses remain limited to the amount of his contribution.
Yield
The annual specified percentage of the purchase price you get for
securities, taking into account all factors (interest or dividend,
course, maturity, etc.). The yield is therefore usually not the same as
the nominal interest rate or the dividend percentage.
Ordinary share
A term used to refer to shares with voting rights however without
preferential rights in contrast to the mostly non-voting preferred
shares in the event that a company has issued both types of shares.
Voting right
Each shareholder has a legally enshrined right to vote at the general
meeting. The numbers of votes that a shareholder unites under his
auspices are determined by the number of voting shares in his
possession. The shareholder can also arrange for his voting rights to be
exercised by a third party, e.g. his credit institution or a
shareholders' association.
Futures trading
Securities transactions, whose fulfillment is not immediate (spot
contract) but is only at a later date. In Germany, the futures trading
takes place at the German Futures Exchange (DTB).
The Executive Board
The Executive Board manages the operational affairs of the company.
Preferred shares
Preferred shares generally have no voting rights. To compensate for
this, the owners of these shares are granted other advantages (minimum
dividend, repayment obligation, among others for accrued dividends).
Convertible Bond
The holder of a convertible bond can during the term of the bond have it
converted into shares at a predetermined ratio. Whether the conversion
option is of interest to the holder depends on the share price. The bond
is repaid at maturity (amortized), in as far as the conversion right is
not exercised.
XETRA (Exchange Electronic Trading)
Electronic trading on the Frankfurt Stock Exchange.
From the author:
It is never too early
to prepare the future of a company . There is no inappropriate
Moment, but rather only poor concepts or lame excuses.
(Interview CNN, Atlanta 2001)
"The
success of a company depends largely on being able to judge the future in
the best possible way. The best way is to shape the future itself."
Lecture World Economic Forum, 2003
"We have not gone public, to become rich or famous. The objective is rather to grow - faster and more sustainable than all others."
Speech at the NASDAQ, 2001
