Equities. History What were the first stocks? Where were they traded? Who traded them?
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Transcript of Equities. History What were the first stocks? Where were they traded? Who traded them?
S
Equities
History
What were the first stocks?
Where were they traded?
Who traded them?
The First Stock Exchange
Where and when was the first stock exchange created?
Antwerp, Belgium (1531)
How it started…
Began as debt issuance
The concept of equity was not yet created
Market was made of debt
Some finance partnerships
East India Companies
As shipping boomed in the 1600s
Investors put money up
Received a share in the profits to lessen risk
LLC’s were formed
East India
East India companies fully established
Profit sharing?
First joint stock companies
Allowed companies to demand more
Size and royal charters meant huge profits
Coffee and stocks??
What do coffee and stocks have in common?
East India companies traded on paper
No stock exchange
How did people trade?
The South Seas Bubble
The riches did not last long …
The British East India Company & SSC (South Seas Company)
Other investors wanted a slice
No rules or regulations for issuances
Retaking sunshine from vegetables??
Bubble burst when SSC failed to pay dividends
The New York Stock Exchange
Philadelphia stock exchange
NYSE had geographically competitive advantage
In the heart of all business and trade coming in
Buttonwood Agreement
NASDAQ
Brainchild of National Association of Securities Dealers
Does not inhabit physical space
Increased efficiency
Reduced bid ask spread
Forced NYSE to evolve
Equities / Stocks
A type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets or earnings
Ownership
Two types: Common stock Preferred stock
Liquidation
What you need to know about liquidation…
What is liquidation
Company
Bankruptcy Costs
Unsecured Creditors
Secured Creditors
Preferred Shareholde
rs
Common Stockholde
rs
Dividends
Distribution of corporate earnings
Given to shareholders at regular intervals
Different forms of issuance
Dividend Yields
Share Buybacks
A program by which a company buys back its own shares from the marketplace
Reduces the number of outstanding shares
Management thinks they are undervalued
Two options
Share Buybacks
Stock Splits
A corporate action in which a company divides its existing shares into multiple shares
Always by a specific multiple
Dollar value is unchanged
Why?
Stock Price
Supply and demand
Constant revaluations
Value Stock Price
Market Cap
Largest Companies by Market Cap
Apple
$632.6 Billion
$400 Billion
Microsoft
$358.1 Billion
Berkshire Hathaway
$320.8 Billion
Exxon Mobil
$316.5 Billion
Bid-Ask Spread
Buy or sell: Buy
Of what: EvanCo
How many: 1,000 shares
What price: $100
Buy or sell: Sell
Of what: EvanCo
How many: 1,500 shares
What price: $125
Making the trade
Five types of orders:
Market Order
Limit Order
Day Order
Fill or Kill
Stop Order
Market Order
Can be filled at the market or prevailing price
Usually the first order to get filled
Generally reliable
One pitfall
Notorious Example
Limit Order
Buy or sell a certain amount of stock at a given price or better
Buy limit order
Sell limit order
Thank you!
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