Equities and property

Question 1

Three types of IPO

Answer 1

o Offers for sale (at a fixed price or tender price)
o Placings (with big institutions) - go directly to pensions/investors with new issued shareso Introductions (introduced to the exchange) - sell on stock market

Question 2

Costs of stamp duty / SDRT

Answer 2

0.5% paid by the purchaser

Stamp duty - rounded up to nearest £5
SDRT - rounded up to the nearest penny

Panel on takeovers - £1 on all trades over £10k

Question 3

prefercne shares

Answer 3

• Usually fixed rate of dividend paid half yearly
• Dividends paid before dividends on ordinary shares but only if sufficient after-tax profits
• Lower security than bonds but higher yields
• Usually undated

Question 4

Preference share type

Answer 4

Cumulative - divs rack up until paid
Non - cumulative - lose rights to unpaid divs at the end of year
Participating - can also get profits of the company
Redeemable - at a specified date
Convertable - can change to ordinary share

Question 5

Types of ordinary shares

Answer 5

o A shares (non-voting)
o B shares
o Deferred shares (don’t usually qualify for a dividend until dividends on ordinary shares reach a pre-determined level)

Question 6

Rights Issues

Answer 6

• To fund expansion plans
• Strengthen balance sheet
• Refinance the company after a crisis
• Offered first to existing shareholders
• Expressed as ‘1 for 3’ or ‘2 for 5’ etc
• Price for new shares below current market price
• Rights issues lead to changes in share price

Question 7

Options Under a Rights Issue:

Answer 7

• Subscribe for new shares and pay full amount
• Sell rights in the market
• Sell enough to generate cash to take up remainder
• Lapse - company sells and distributes proceeds after costs

Question 8

Bonus Shares

Answer 8

• Used to bring share capital more in line with real worth
• Reduces the share price to make it more attractive
• Shares are issued fully paid to shareholders
• Also called scrip issue

Question 9

FTSE All-Share

Answer 9

Aggregates:
• FTSE 100
• FTSE 250
• FTSE Small cap - which comprises remaining shares that don’t qualify for the 350.

Question 10

FTSE Fledgling

Answer 10

• Companies too small to qualify for the FTSE All-Share

Question 11

Other FTSE Indices

Answer 11

• TMT - technology, media and telecommunications
• techMARK All-Share - all companies in techMARK sector
• FTSE4Good - companies meeting globally recognised socially responsible standards