Valuing a company by determining what its divisions would be worth if it was broken up and spun off or acquired by another company. Taobiz explains Sum-Of-Parts Valuation For example, you might hear that a young technology company is "worth more than the sum of its parts". This means that the value of the tech company's divisions could be worth more if they were sold to other companies. In most cases, larger companies have the ability to take advantage of synergies and economies of scale that are unavailable to smaller companies, enabling them to maximize a division's profitability and unlock unrealized value.
A defensive strategy by which a target company engages in an activity that might actually ruin the company rather than prevent the hostile takeover. Also known as the "Jonestown Defense." Taobiz explains Suicide Pill This is an extreme version of the poison pill.
A temporary rise in a specific stock or the market as a whole. A sucker rally occurs with little fundamental information to back the movement in price. This rally may continue just long enough for the "suckers" to get on board, after which the market or specific stock falls. Also known as a "dead cat bounce" or a "bull trap". Taobiz explains Sucker Rally A sucker rally is a buzz word describing a rise in price that does not properly reflect the true value of the stock. For example, suppose that two high-tech companies, "A" and "B", see an increase in stock price due to reporting strong financial statements, and a separate high-tech, company "C", sees a rise in stock price. If the real reason for the rally turns out to be because of potential acquisitions of A and B, then C will have had a sucker rally, rising along with A and B.
The right of existing shareholders in a company to retain an equal percentage ownership over time by subscribing to new stock issuances at or below market prices. The subscription right is usually enforced by the use of rights offerings, which allow shareholders to exchange rights for shares of common stock at a price generally below what the stock is currently trading for. Also known as the "subscription privilege" or "preemptive right" of the shareholder. Taobiz explains Subscription Right Subscription rights are not necessarily guaranteed by all companies, but most have some form of dilution protection in their charters. If granted this privilege, shareholders may purchase their shares before they are offered to the secondary markets. This form of dilution protection is usually good for a few weeks before a company will go about seeking new investors in the broad market. Investors will receive notification of their subscription right by mail (from the company itself) or through their brokers or custodians.
1. A static price at which existing shareholders can participate in a rights offering conducted by a public company so they may retain their proportional ownership of the business. The subscription price will be the same for all shareholders and typically less than the current market price of the underlying stock. 2. Subscription price may also refer to the exercise price for warrant holders in a particular stock. Warrants may be issued at different times by the company along with debt offerings, so subscription prices may vary slightly from one owner to another. Taobiz explains Subscription Price Rights and warrants offerings are less common ways to raise capital than through a secondary offering of stock, and may signal a lack of demand for shares in the open market. Issuing rights encourages more long-term ownership of the company, as existing shareholders are increasing their investment in the company. A rights offering may also come with an oversubscription privilege that allows existing shareholders to pick up any extra rights to shares not claimed by other shareholders. Rights offerings tend to happen pretty quickly, as the subscription price is static and needs to be relevant to the current market price for shareholders to be interested in the deal.
Newly issued securities that an investor has agreed or stated his or her intent to buy prior to the issue date. When investors use rights, they expect to own the designated number of shares to which they have subscribed once the offering is complete. Taobiz explains Subscribed The goal of an investment bank in a public offering of securities is to have enough subscribed investors for the issue. Essentially, you can view a subscription to a public offering as an order to purchase soon-to-be issued shares from your brokerage firm. The investment bank handling a public offering tries to determine which offering price will result in an optimal number of share subscriptions; too many subscriptions will not impress the issuing company, as it is likely to prefer a higher offering price. Conversely, too few subscriptions might result in the investment bank being unable to sell its entire inventory of the security issue, exposing it to significant losses.
A form of corporation that meets the IRS requirements to be taxed under Subchapter S of the Internal Revenue Code. This gives a corporation with 100 shareholders or less the benefit of incorporation while being taxed as a partnership. This means that any profits earned by the corporation are not taxed at the corporate level, but rather at the level of the shareholders. Also known as "S corporation". Taobiz explains Subchapter S (S Corporation) Having S corporation status can prove a huge benefit for a corporation. The corporation can pass income directly to shareholders and avoid the double taxation that is inherent with the dividends of public companies, while still enjoying the advantages of the corporate structure. In order to qualify, a corporation must be a small business corporation. This means the following requirements must be met: 1) Must be a domestic corporation 2) Must not have more than 100 shareholders 3) Must include only eligible shareholders 4) Must have only one class of stock
A stock that experiences a continued period of growth exceeding that of the economy. Generally, the duration is over a year in length. Taobiz explains Supernormal Growth Stock Supernormal stocks will revert back to normal growth after a few years. Exceptional growth is usually a part of the company's life cycle.
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