Some of the most important terms you need to know about stock market investing.
Stock Market Equity related terminology 101
Stock Market Equity related terminology 101-
- Public Issue- When a company tends to raise money from general public, institutions etc.
- IPO( Initial Public Offer)- When a company raises funds from public for the first time via selling its shares.
- E.g. Happiest Minds, IRCTC, Route Mobile etc
- OFS (Offer for sale)- Post IPO any time a company raises funds/sell shares it is known as Offer for sale
- E.g. HDFC amc did a few months back to reduce its stake as per SEBI requirements
- Rights Issue- When a company provides right to its existing shareholders to buy its shares before anyone else at a cheaper price (generally). Done on a proportionate basis
- E.g. Reliance recently brought its Rights issue to raise funds for becoming Net- Debt free.
- Bonus Issue- When a company decides to provide some extra shares to its shareholders at free of cost. Generally done reward shareholders for their trust in the business.
- E.g.- Our IT giants like Infosys, Wipro etc are famous for stock bonuses which created humongous wealth for its shareholders
- Stock Split- In this method a company reduces the face value of its share. It done to encourage more public participation as the stock becomes cheaper in price (Value remains same)
- E.g. Recently done in Eicher motors 1:10 split Rs 22000 share became Rs 2200 share. Each shareholder owning 1 share got 10 shares. Market cap remained same. Stock became more liquid & cheap for more people to participate
- Private Placement- Selling of shares directly to a private investor.
- E.g. Yes Bank selling stake in August 2019 to big institutions.
- BuyBack- When the company buys back its share from open market generally at prices higher than the current price(Because if its lower id doesn’t make sense). It is done to earn the trust of public by showing that the promoters (majority shareholders) trust the business’ future. It is also done to reduce the free float in the market.
- E.g. Adani Ports did it last financial year. A lot of companies did during covid crash to keep investor’s trust, IT companies etc.
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