A defensive tactic used by a targeted firm in a hostile takeover situation. In a Pac-Man defense, the target firm turns around and tries to acquire the other company that has made the hostile takeover attempt. This term has been accredited to Bruce Wasserstein, chairman of Wasserstein & Co. Taobiz explains Pac-Man Defense This term comes from the Pac-Man video game. In the game, once Pac-Man eats a power pellet he is able to turn around and eat the ghosts that are chasing after him in the maze. When one company makes an unsolicited and aggressive bid on another publicly traded company, the takeover attempt may not be welcomed by the targeted firm. In an attempt to scare off the would-be acquirers, the takeover target may use any method in an attempt to acquire the other company, including dipping into its war chest for cash to purchase the other company's stock.
The price-to-earnings (P/E) ratio is the valuation ratio of a company's market value per share divided by a company's earnings per share (EPS). A P/E ratio of 30 means that a company's stock price is trading at 30 times the company's earnings per share. Taobiz explains P/E 30 Ratio A P/E of 30 is high by historical stock market standards. This type of valuation is usually placed on only the fastest-growing companies by investors in the company's early stages of growth. once a company becomes more mature, it will grow more slowly and the P/E tends to decline.
An individual who has achieved a high net worth as a result of the large total market value of the assets he or she owns. This phenomenon usually occurs when investors buy marketable securities that are later bid up to much higher prices on the open market. While this creates large amounts of "paper profit", the paper millionaire's riches usually aren't safe until these holdings are liquidated. Taobiz explains Paper Millionaire It is important to note that paper millionaires are not the same as true millionaires, which generally refers to people who have more than $1 million in cash in the bank. For example, consider a hypothetical investor during the 1990s technology bubble who invested in startup dotcom companies. Assuming that none of this investor's shares is sold, he or she would have become a paper millionaire, as recorded on the brokerage statement, despite having very little cash in the bank. However, once the dotcom bubble burst, technology stocks saw their share prices collapse, and former paper millionaires once again found themselves poor, owning only pieces of paper (i.e. share certificates) that were no longer worth the millions of dollars at which the market had previously valued them.
Stock of two companies under the same management that is sold as one unit and usually appears on one certificate. Taobiz explains Paired Shares These are also known as Siamese Shares.
The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings. Calculated as: Taobiz explains Payout Ratio For example, a very low payout ratio indicates that a company is primarily focused on retaining its earnings rather than paying out dividends. The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend because smaller dividends are easier to pay out than larger dividends.
The compensation and benefit a brokerage receives by directing orders to different parties to be executed. The brokerage firm receives a small payment, usually a penny per share, as compensation for directing the order to the different parties. Taobiz explains Payment For Order Flow This is a major benefit for smaller brokerage firms, which can't handle thousands of orders. In effect, this allows them to send off their orders to another firm to be bundled with other orders to be executed. This helps brokerage firms keep their costs lower. The market maker or exchange benefits from the additional share volume it handles, so it compensates brokerage firms for directing traffic. Your brokerage firm is required by the SEC to inform you if it receives payment for sending your orders to specific parties. It must do this when you first open your account as well as on an annual basis. The firm must also disclose every order on which it receives payment.
The date on which a declared stock dividend is scheduled to be paid. Taobiz explains Payment Date only those shareholders who bought the stock before the ex-dividend date receive the dividend on the date of payment (payable date).
A pre-prospectus statement of financial condition that is sent to a limited group of potential underwriters and institutional investors prior to a securities or IPO filing. The goal of a pathfinder prospectus is to create demand and eventually set the price for the offering, as well as to clear up any inconsistencies in the company's published financial statements. Taobiz explains Pathfinder Prospectus The pathfinder prospectus will contain almost all of the same information as an IPO prospectus except for the price of the shares, which will be set once underwriters get a feel for the overall demand. If demand is high enough, the underwriter syndicate will most often use its over-allotment right to issue extra shares, providing added profit to the investment banks and more financing to the company.
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