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