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Finance GlossaryEquity Shares
Equity Shares
Definition of Equity Shares
Equity shares is a term used to describe stock of a company that’s issued via an Initial Public Offer (IPO), already issued and traded on the stock market, or freshly available through a Follow on Public Offer (FPO).
For a company, the goal of issuing equity shares is to raise money while investors who buy these equity shares get perks like voting rights, dividends, and even a share of the assets in case the company is liquidated.
For a company, the goal of issuing equity shares is to raise money while investors who buy these equity shares get perks like voting rights, dividends, and even a share of the assets in case the company is liquidated.
Related Terms
Bought Out Deal
A bought-out deal is a stock offering where an investment bank buys the entire issue of shares from a company. In turn, the investment bank will attempt to sell the shares to other investors. A deal of this kind has two benefits:
- The company need not worry about subscription as the investment bank will purchase the entire offering
-
The investment bank can negotiate with the company and get the shares at a discount
That said, there are risks to a bought out deal like:
- It is up to the investment bank to sell the shares to investors in order to recoup the principal or make a profit
- The investment bank also runs the risk of receiving no interest in the shares from other investors
- Guarantee purchase
If the issue size of the bought-out deal is large enough, the investment bank may team up with others to fulfil the purchase.
At The Money
At The Money is a scenario in which the strike price of an options contract is the same as the market price of its underlying security.
Exercising an option At The Money can lead to a loss as the premium paid for the contract won’t be recovered.
That said, At The Money is known to be a positive indicator as it indicates the option may soon have intrinsic value.
Exercising an option At The Money can lead to a loss as the premium paid for the contract won’t be recovered.
That said, At The Money is known to be a positive indicator as it indicates the option may soon have intrinsic value.
Open-End Fund
An open-end fund, also referred to as a mutual fund in India, is an investment vehicle that is constantly issuing new shares to investors and also redeeming shares on request. This structure means that the fund's total assets under management (AUM) and the number of outstanding shares change daily depending on the investor's purchases and redemptions.
Lead Underwriter
The lead underwriter is a financial institution that is in charge of ensuring that an IPO is successful on the primary market. Companies may also hire lead underwriters to carry out a FPO.
Moving Average (SMA/EMA)
Moving Average (SMA/EMA) is a trend-following indicator that reduces noise by averaging past prices. Simple moving average (SMA) takes an equal average of prices over a chosen period, while Exponential moving average (EMA) emphasises recent prices, allowing it to react faster to changes in market direction.
Net Profit Margin
Net Profit Margin shows the portion of revenue that remains as profit once all operating costs, interest, and taxes have been deducted. It is expressed as a percentage and helps investors understand a company’s overall profitability and cost efficiency.
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