A type of corporate reorganization whereby the stock of a subsidiary is exchanged for shares in a parent company. Taobiz explains Split-Off This is a somewhat rare situation. For example, Viacom announced a split off of its interest in Blockbuster in 2004 whereby Viacom offered its shareholders stock in Blockbuster in exchange for an appropriate amount of Viacom stock.
The act of dividing a large order of financial securities into several smaller lots in order to allow each portion to be traded at different prices. The ultimate effect of using a split block pricing method is that the trader will receive the order at a price equaling the weighted average price of each block traded. Taobiz explains Split Block Pricing In some cases, split block pricing would be used on a large trade order in order to match smaller positions desired by counter-parties to the transaction. For example, a trader wants to sell 1,000 call options of XYZ corp, assuming that the only two buyers of the XYZ options want to buy 600 options at $5.00 and 400 options at $5.05; the order will be split into two blocks of 600 and 400 contracts (each representing 100 shares), respectively and the selling trader would receive proceeds of $502,000 ((400 x $5.05 x 100) + (600 x $5.00 x 100)).
A modification made to a security's price that takes into consideration the effect of a split on the total number of shares or units outstanding, in order to compare the security's current price to its historical price in a consistent form of valuation. In order to adjust a security's price, the post split price would be multiplied by the split ratio (or ratios if multiple splits had occurred) in order to get a split-adjusted price. While stock prices most often are referred to as split-adjusted, options on underlying split stocks are also split-adjusted by increasing the number of shares covered by the terms of the option. This conversion is done by the same split ratio as the underlying shares, and the strike price is divided by the split ratio. Taobiz explains Split Adjusted If you own a stock that undergoes a stock split, it's imperative that you use the split-adjusted prices when calculating your return. Consider a fictional company that traded for $20 a share in 1990. It has since undergone three 2-for-1 splits and now trades at $30. Although it may seem that the stock price has gone up 50%, it has actually appreciated by much more than that. One 1990 share would now be worth $240 because the original share is equivalent to eight current shares, each worth $30. This means that the stock has appreciated approximately 12 times. The 1990 split-adjusted share price would be $2.50 (20/8).
The procedure of voting for a company's directors in which each shareholder is entitled to one vote per share. This is sometimes known as straight voting. Taobiz explains Statutory Voting For example, if you owned 100 shares, you would have 100 votes.
Also known as incentive stock options, this type of employee stock option gives participants an additional tax advantage that unqualified or non-statutory stock options do not. Statutory stock options require a plan document that clearly outlines how many options are to be given to which employees, and those employees must exercise their options within 10 years of receiving them. Furthermore, the option exercise price cannot be less than the market price of the stock at the time the option was granted. Statutory stock options cannot be sold until at least a year after the exercise date and two years after the date the option was granted. Taobiz explains Statutory Stock Option The taxation of statutory stock options can be somewhat complicated. Exercise of statutory stock options will not result in immediate declarable taxable income to the employee (one of the chief advantages of this type of option.) Capital gains tax is then paid on the difference between the exercise and sale price. This type of option is also considered one of the preference items for the alternative minimum tax.
A value that, instead of being par value, is assigned to a corporation's stock for accounting purposes. Stated value has no relation to market price. Taobiz explains Stated Value For example, if stated value is $1 per share and the company issues 1 million shares, the stated value of its stock is $1 million. This amount is credited to the company's capital stock account, and is considered the legal capital of a corporation. Because it is generally illegal for a company to pay dividends or repurchase shares if doing so impairs the legal capital, stated value does help to provide shareholders with some protection. Par value stock has a stated value on its face representing the minimum amount contributed by the shareholder. Stock without a par value has no stated value, allowing the corporation to issue it for any amount per share that the board of directors determines to be appropriate.
An initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company. From a pool of bidders, the bankrupt company chooses the stalking horse to make the first bid. Taobiz explains Stalking-Horse Bid This method allows the distressed company to avoid low bids on its assets. once the stalking horse has made its bid, other potential buyers may submit competing bids for the bankrupt company's assets. In essence, the stalking horse sets the bar so that other bidders can't low-ball the purchase price.
An investment vehicle found in both company retirement plans and, quite recently, IRA accounts. Stable value funds are comprised of mostly 'synthetic GICs' (known also as wrapped bonds) because of their inherent stability. These bonds can be short or intermediate term with longer maturities than other choices such as money market funds. They are paired (or wrapped) with insurance contracts to guarantee a specific minimum return. Taobiz explains Stable Value Fund In times of economic recession, stable value funds can prove to be a most valuable investment to have. While many other investments' returns are much lower in hard times, stable value funds remain just that, stable. The owner of the investment will continue to receive the agreed upon interest rate as well as the full principal regardless of the state of the economy. Generally speaking, funds and pooled investments tend to be less risky as the investment is not reliant on one specific company, stock, etc.
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