Equities. History What were the first stocks? Where were they traded? Who traded them?

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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

Google

$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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