The actual gain or loss of an investor. This can be expressed in the following formula: expected return (ex-ante) plus the effect of firm-specific and economy-wide news. Taobiz explains Actual Return As opposed to expected return, actual return is what investors actually receive from their investments. The discrepancy between actual and expected return is due to systematic and unsystematic risk.
An individual or group that purchases large numbers of a public company’s shares and/or tries to obtain seats on the company’s board with the goal of effecting a major change in the company. A company can become a target for activist investors if it is mismanaged, has excessive costs, could be run more profitably as a private company or has another problem that the activist investor believes it can fix to make the company more valuable. Taobiz explains Activist Investor Private equity firms, hedge funds and wealthy individuals are types of entities that might decide to act as activist investors. One well-known activist investor is Carl Icahn. He has attempted to make major changes at Yahoo!, Blockbuster, Time Warner and RJR Nabisco, among other companies. Other big-name activist investors include Kirk Kerkorian, Bill Ackman, Eddie Lampert and Nelson Peltz. One indication that a company may have become a target for activist investors is the filing of SEC Form 13D, which must be filed when an investor purchases 5% or more of a company’s shares.
An obligation of NYSE specialists to enter the market on a particular security (either by posting or bidding and ask) when there is not sufficient market demand and supply to efficiently match orders. Taobiz explains Affirmative Obligation The affirmative obligation requires specialists to create a market for a security when public demand or supply is ineffective and can not create it for itself.
A written statement declaring the physical loss of a security - usually through theft or destruction by fire/flood. The affidavit contains all details regarding the loss, the owner's name and any information pertaining to the security, such as serial number or date of issue. once the statement has been made, one can issue a letter of indemnity, requesting the replacement of the security. Taobiz explains Affidavit Of Loss When holding a physical record of a security, such as a stock certificate, one face's the chance of losing the copy. If the record is stolen, misplaced or destroyed, the owner is required to swear an affidavit pertaining to the loss of the item. This is an oath outlining that, to the best of the person's knowledge, the record is truly gone. If the lost copy appears after the owner received a replacement security, the original record must be forwarded to the company for disposal.
An SEC regulation that requires tender offers to be available to all holders of the identical class of the security. Taobiz explains All-Holders Rule For example, if company ABC has tendered an offer to buy back its B shares, then all holders of this class must be allowed to participate in the buy back. The SEC does not require ABC co. to offer this buy back to the shareholders of its other classes. This rule is especially important during takeover bids, ensuring that any tender offers made by the acquiring company cannot be directed only to those shareholders in favor of the takeover.
A condition used on a buy or sell order to instruct the broker to fill the order completely or not at all. If there is insufficient supply to meet the quantity requested by the order then it is canceled at the close of the market. Taobiz explains All Or None - AON For example, if you send an AON order to your broker requesting 200 shares at $15, the broker will not fill the order unless he or she can obtain the 200 shares at $15. This prevents investors from having orders half filled before they expire. This is contrary to a common limit order, which is commonly partially filled. For example, if 150 shares trade at $15 and then rise to $17, the 150 shares will be purchased by the investor with the limit order and the remainder will be bought when the shares fall back to $15. If the trader had an AON order then he or she will not receive any shares and will have to resubmit the order the next day to buy the 200 shares at $15.
A trade that has only one agent acting for the buyer and seller. Also known as Dual Agency. Taobiz explains Agency Cross Agency crosses occur when a broker receives perfectly offsetting trades simultaneously. The broker must send down the orders to the trading floor, announce the bid and manually cross the trades after no better bid is made.
A type of internal cost that arises from, or must be paid to, an agent acting on behalf of a principal. Agency costs arise because of core problems such as conflicts of interest between shareholders and management. Shareholders wish for management to run the company in a way that increases shareholder value. But management may wish to grow the company in ways that maximize their personal power and wealth that may not be in the best interests of shareholders. Taobiz explains Agency Costs Some common examples of the principal-agent relationship include: management (agent) and shareholders (principal), or politicians (agent) and voters (principal). Agency costs are inevitable within an organization whenever the principals are not completely in charge; the costs can usually be best spent on providing proper material incentives (such as performance bonuses and stock options) and moral incentives for agents to properly execute their duties, thereby aligning the interests of principals (owners) and agents.
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