Definition of Oversubscription privilege

Oversubscription privilege

In a rights issue, arrangement by which shareholders are given the right to apply
for any shares that are not taken up.

markup

the period after an announcement of a takeover bid in which stock prices typically rise until a merger or acquisition is made (or until it falls through).

runup

the period before a formal announcement of a takeover bid in which one or more bidders are either preparing to make an announcement or speculating that someone else will.

American shares

Securities certificates issued in the U.S. by a transfer agent acting on behalf of the foreign
issuer. The certificates represent claims to foreign equities.

Appraisal rights

A right of shareholders in a merger to demand the payment of a fair price for their shares, as
determined independently.

Authorized shares

Number of shares authorized for issuance by a firm's corporate charter.

Back-up

1) When bond yields and prices fall, the market is said to back-up.
2) When an investor swaps out of one security into another of shorter current maturity he is said to back up.

Bankruptcy

State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from
the stockholders to the bondholders.

Bankruptcy cost view

The argument that expected indirect and direct bankruptcy costs offset the other
benefits from leverage so that the optimal amount of leverage is less than 100% debt finaning.

Bankruptcy risk

The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.

Bankruptcy view

The argument that expected bankruptcy costs preclude firms from being financed entirely
with debt.

Bellwether issues

Related:Benchmark issues.

Benchmark issues

Also called on-the-run or current coupon issues or bellwether issues. In the secondary
market, it's the most recently auctioned Treasury issues for each maturity.

Blue-chip company

Large and creditworthy company.

Bottom-up equity management style

A management style that de-emphasizes the significance of economic
and market cycles, focusing instead on the analysis of individual stocks.

Cheapest to deliver issue

The acceptable Treasury security with the highest implied repo rate; the rate that a
seller of a futures contract can earn by buying an issue and then delivering it at the settlement date.

Company-specific risk

Related: Unsystematic risk

Cost company arrangement

arrangement whereby the shareholders of a project receive output free of
charge but agree to pay all operating and financing charges of the project.

Coupon

The periodic interest payment made to the bondholders during the life of the bond.

Coupon equivalent yield

True interest cost expressed on the basis of a 365-day year.

Coupon payments

A bond's interest payments.

Coupon rate

In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually
paid twice a year.

Cum rights

With rights.

Current coupon

A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
offered on new bonds of a similar maturity and credit risk.

Current issue

In Treasury securities, the most recently auctioned issue. Trading is more active in current
issues than in off-the-run issues.

Current-coupon issues

Related: Benchmark issues

Depository Trust Company (DTC)

DTC is a user-owned securities depository which accepts deposits of
eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in
its custody, and provides for withdrawals of securities from its custody.

Dividend rights

A shareholders' rights to receive per-share dividends identical to those other shareholders receive.

Dual-currency issues

Eurobonds that pay coupon interest in one currency but pay the principal in a different
currency.

Dupont system of financial control

Highlights the fact that return on assets (ROA) can be expressed in terms
of the profit margin and asset turnover.

Euroequity issues

Securities sold in the Euromarket. That is, securities initially sold to investors
simultaneously in several national markets by an international syndicate. Euromarket.
Related: external market

Evening up

Buying or selling to offset an existing market position.

Ex-rights

In connection with a rights offering, shares of stock that are trading without the rights attached.

Ex-rights date

The date on which a share of common stock begins trading ex-rights.

Floating supply

The amount of securities believed to be available for immediate purchase, that is, in the
hands of dealers and investors wanting to sell.

Full coupon bond

A bond with a coupon equal to the going market rate, thereby, the bond is selling at par.

Fully diluted earnings per shares

Earnings per share expressed as if all outstanding convertible securities
and warrants have been exercised.

Give up

The loss in yield that occurs when a block of bonds is swapped for another block of lower-coupon
bonds. Can also be referred to as "after-tax give up" when the implications of the profit or loss on taxes are
considered.

Group of five (G5/G-5)

The five leading countries (France, Germany, Japan, United Kingdom, and the U.S.) that
meet periodically to achieve some cooperative effort on international economic issues. When currency issues
are discussed, the monetary authorities of these nations hold the meeting.

Group of seven (G7/G-7)

The G-5 countries plus Canada and Italy.

Group rotation manager

A top-down manager who infers the phases of the business cycle and allocates
assets accordingly.

High-coupon bond refunding

Refunding of a high-coupon bond with a new, lower coupon bond.

Holding company

A corporation that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.

Intercompany loan

Loan made by one unit of a corporation to another unit of the same corporation.

Intercompany transaction

Transaction carried out between two units of the same corporation.

Issue

A particular financial asset.

Issued share capital

Total amount of shares that are in issue. Related: outstanding shares.

Issuer

An entity that issues a financial asset.

Legal bankruptcy

A legal proceeding for liquidating or reorganizing a business.

Level-coupon bond

Bond with a stream of coupon payments that are the same throughout the life of the bond.

Liquidation rights

The rights of a firm's securityholders in the event the firm liquidates.

Lock-up CDs

CDs that are issued with the tacit understanding that the buyer will not trade the certificate.
Quite often, the issuing bank will insist that the certificate be safekept by it to ensure that the understanding is
honored by the buyer.

Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon periods, usually the first, is longer than the other periods or the standard period.

Low-coupon bond refunding

Refunding of a low coupon bond with a new, higher coupon bond.

Long coupons

1) Bonds or notes with a long current maturity.
2) A bond on which one of the coupon
periods, usually the first, is longer than the other periods or the standard period.

Management/closely held shares

Percentage of shares held by persons closely related to a company, as
defined by the Securities and exchange commission. Part of these percentages often is included in
Institutional Holdings -- making the combined total of these percentages over 100. There is overlap as
institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company.

Money supply

M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits.
M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits.
M3: M-2 plus large time deposits and term repos.
L: M-3 plus other liquid assets.

Multiple-issuer pools

Under the GNMA-II program, pools formed through the aggregation of individual
issuers' loan packages.

New-issues market

The market in which a new issue of securities is first sold to investors.

Original issue discount debt (OID debt)

Debt that is initially offered at a price below par.

Outright rate

Actual forward rate expressed in dollars per currency unit, or vice versa.
Outsourcing
he practice of purchasing a significant percentage of intermediate components from outside suppliers.

Outstanding shares

shares that are currently owned by investors.

Oversubscribed issue

Investors are not able to buy all of the shares or bonds they want, so underwriters must
allocate the shares or bonds among investors. This occurs when a new issue is underpriced or in great demand
because of growth prospects.

Pass-through coupon rate

The interest rate paid on a securitized pool of assets, which is less than the rate
paid on the underlying loans by an amount equal to the servicing and guaranteeing fees.

Pay-up

The loss of cash resulting from a swap into higher price bonds or the need/willingness of a bank or
other borrower to pay a higher rate of interest to get funds.

Performance shares

shares of stock given to managers on the basis of performance as measured by earnings
per share and similar criteria. A control device used by shareholders to tie management to the self-interest of
shareholders.

Pickup

The gain in yield that occurs when a block of bonds is swapped for another block of higher-coupon bonds.

Preemptive right

Common stockholder's right to anything of value distributed by the company.

Preferred shares

Preferred shares give investors a fixed dividend from the company's earnings. And more
importantly: preferred shareholders get paid before common shareholders. See: preferred stock.

Prepackaged bankruptcy

A bankruptcy in which a debtor and its creditors pre-negotiate a plan or
reorganization and then file it along with the bankruptcy petition.

Presold issue An issue

that is sold out before the coupon announcement.

Property rights

rights of individuals and companies to own and utilize property as they see fit and to receive
the stream of income that their property generates.

Pure yield pickup swap

Moving to higher yield bonds.

Raw material supply agreement

As used in connection with project financing, an agreement to furnish a
specified amount per period of a specified raw material.

Reopen an issue

The Treasury, when it wants to sell additional securities, will occasionally sell more of an
existing issue (reopen it) rather than offer a new issue.

Right

A short-lived (typically less than 90 days) call option for purchasing additional stock in a firm, issued
by the firm to all its shareholders on a pro rata basis.

Rights offering

Issuance of "rights" to current shareholders allowing them to purchase additional shares,
usually at a discount to market price. shareholders who do not exercise these rights are usually diluted by the
offering. rights are often transferable, allowing the holder to sell them on the open market to others who may
wish to exercise them. rights offerings are particularly common to closed end funds, which cannot otherwise
issue additional common stock.

Rights-on

shares trading with rights attached to them.

Seasoned issue

issue of a security for which there is an existing market. Related: Unseasoned issue.

Seasoned new issue

A new issue of stock after the company's securities have previously been issued. A
seasoned new issue of common stock can be made by using a cash offer or a rights offer.

Secondary issue

1) Procedure for selling blocks of seasoned issues of stocks.
2) More generally, sale of already issued stock.

Selling group

All banks involved in selling or marketing a new issue of stock or bonds

Shareholders' equity

This is a company's total assets minus total liabilities. A company's net worth is the
same thing.

Shareholders' letter

A section of an annual report where one can find jargon-free discussions by
management of successful and failed strategies which provides guidance for the probing of the rest of the
report.

Shares

Certificates or book entries representing ownership in a corporation or similar entity

Small issues exemption

Securities issues that involve less than $1.5 million are not required to file a
registration statement with the SEC. Instead, they are governed by Regulation A, for which only a brief
offering statement is needed.

Special drawing rights (SDR)

A form of international reserve assets, created by the IMF in 1967, whose
value is based on a portfolio of widely used currencies.

Specific issues market

The market in which dealers reverse in securities they wish to short.

Step-up

To increase, as in step up the tax basis of an asset.

Step-up bond

A bond that pays a lower coupon rate for an initial period which then increases to a higher
coupon rate. Related: Deferred-interest bond, Payment-in-kind bond

Supermajority

Provision in a company's charter requiring a majority of, say, 80% of shareholders to approve
certain changes, such as a merger.

Supply shock

n event that influences production capacity and costs in an economy.

Support level

A price level below which it is supposedly difficult for a security or market to fall.

Take-up fee

A fee paid to an underwriter in connection with an underwritten rights offering or an
underwritten forced conversion as compensation for each share of common stock he underwriter obtains and
must resell upon the exercise of rights or conversion of bonds.

Target zone arrangement

A monetary system under which countries pledge to maintain their exchange rates
within a specific margin around agreed-upon, fixed central exchange rates.

Transferable put right

An option issued by the firm to its shareholders to sell the firm one share of its
common stock at a fixed price (the strike price) within a stated period (the time to maturity). The put right is
"transferable" because it can be traded in the capital markets.

Unseasoned issue

issue of a security for which there is no existing market. See: seasoned issue.

Upstairs market

A network of trading desks for the major brokerage firms and institutional investors that
communicate with each other by means of electronic display systems and telephones to facilitate block trades
and program trades.

Uptick

A term used to describe a transaction that took place at a higher price than the preceding transaction
involving the same security.

Uptick trade

Related:Tick-test rules

Vanilla issue

A security issue that has no unusual features.

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