股票市场基础知识 Stock Market Basics

StockMarketBasicsHowaCompany“GoesPublic”--Mr.Yates1/17SomeFinancialTermsEarningsperShare:Theamountofprofittowhicheachshareisentitled.GoingPublic:SlangforwhenacompanyisplanninganIPO.IPO:ShortforInitialPublicOffering.AnIPOiswhenacompanysellsstockinitselfforthefirsttime.2/17Termscontinued…MarketCap:Theamountofmoneyyouwouldhavetopayifyouboughtevershareofstockinacompany.(Tocalculatemarketcap,multiplythenumberofsharesbythepricepershare.)ShortforMarketCapitalization.

Share:Asharerepresentsaninvestor'sownershipina"share"oftheprofits,losses,andassetsofacompany.Itiscreatedwhenabusinesscarvesitselfintopiecesandsellsthemtoinvestorsinexchangeforcash.TickerSymbol:Ashortgroupoflettersthatrepresentsaparticularstock(e.g.,"CocaCola"isreferredtoas"KO".)Underwriter:Thefinancialinstitutionorinvestmentbankthatisdoingallofthepaperworkandorchestratingacompany'sIPO.3/17PurposeoftheStockMarketAlmosteverylargecorporationstartedoutasasmall,mom-and-popoperationandthroughgrowth,becamefinancialgiants.Wal-Mart,DellComputer,andMcDonald’shadcombinedprofitsof$10.34billionthisyear.Wal-Martwasoriginallyasingle-storebusinessinArkansas.4/17StockMarketDellcomputerbeganwithMichaelDellsellingcomputersoutofhiscollegedormroom.McDonald’swasonceasmallrestaurantnoonehadheardof.5/17Howdidtheygrow?Howdidthesesmallcompaniesgrowfromtiny,hometownenterprisestothreeofthelargestbusinessesintheAmericaneconomy?Theyraisedcapitalbysellingstockinthemselves.6/17ExampleofaCompany:NewtoPublicAftergettingmarried,ayoungcoupledecidedtostartabusiness.Itwouldallowthemtoworkforthemselves,aswellasarrangetheirhoursaroundtheirfamily.Bothhusbandandwifehavealwayshadastronginterestinfurniture,sotheydecidetoopenastoreintheirhometown.Afterborrowingmoneyfromthebank,theynametheircompany“NWFurniture”andgointobusiness.Thefirstfewyears,thecompanymakeslittleprofitbecausetheearningsareplowedbackintothestore,buyingadditionalinventoryandaddingontothebuildingtoaccommodatetheincreasinglevelofmerchandise.7/17NWFurnitureTenyearslater,thebusinesshasgrownrapidly.Thecouplehasmanagedtopayoffthecompany’sdebt,andprofitsareover$500,000peryear.ConvincedthatNWFurniturecoulddoaswellinseverallarger,neighboringcities,thecoupledecidestheywanttoopentwonewbranches.Theyresearchtheiroptionsandfindoutitisgoingtocostover$4milliondollarstoexpand.Notwantingtoborrowmoneyandbestrappedwithinterestpaymentsagain,theydecidetosellstockinthecompany.8/17NWFurniture’sValueThecompanyapproachesan“underwriter”,suchasGoldmanSachsorJPMorgan,whodeterminesthevalueofthebusiness.Asmentionedbefore,NWFurnitureearns$500,000after-taxprofiteachyear.Italsohasabookvalueof$3million[thevalueoftheland,building,inventory,etc.subtractedbythecompany’sdebt]Theunderwriterresearchesanddiscoverstheaveragefurniturestockistradingat20timesearnings.9/17NWFurniture’s“BookValue”Whatdoesthismean?Simply,youwouldmultiplytheearningsof$500,000by20.InNWFurniture’scase,theansweris$10million.Addbookvalue,andyouarriveat$13million.Thismeans,intheunderwriter’sopinion,NWFurniture,isworth$13Million.10/17Sohowmucharetheywillingtogiveup?Ouryoungcouple,nowintheir30’s,mustdecidehowmuchofthecompanytheyarewillingtosell.Rightnow,theyown100%ofthebusiness.11/17Givingitup…Themoretheysell,themorecashthey’llraise,buttheywillalsobegivingupalargerpartoftheirownership.Asthecompanygrows,thatownershipwillbeworthmore,soawiseentrepreneurwouldnotsellmorethanheorshehadto.12/17NWFurnitureGoesPublic!Afterdiscussingit,thecoupledecidestokeep60%ofthecompanyandselltheother40%tothepublicasstock.[Thismeansthattheywillkeep$7.8millionworthofthebusiness.Becausetheyownamajorityofthestock,theywillstillbeincontrolofthestore.]Theother40%theysoldtothepublicisworth$5.2million.Theunderwritersfindinvestorswhoarewillingtobuythestock,andgiveacheckfor$5.2milliontothecouple.13/17Sonowtheyhavecashtoexpand.Althoughtheyownlessofthecompany,theirstakewillhopefullygrowfasternowthattheyhavethemeanstoexpandrapidly.Usingthemoneyfromtheirpublicoffering,NWFurnituresuccessfullyopensthetwonewstoresandhave$1.2millionincashleftover.[rememberitwasgoingtocost$4millionforthenewstores].14/17Expanding…Businessisevenbetterinthenewbranches,whichareinmorepopulatedcities.Thetwonewstoresbothmakearound$800,000ayearinprofiteach,withtheoldstorestillmakingthesame$500,000.Betweenthethreestores,NWFurniturenowmakesanannualprofitof$2.1milliondollars.15/17Sowhataretheyworthnow?Thisisgreatnewsbecause,althoughtheydon’thavethefreedomtosimplycloseshopanymore,thebusinessisnowvaluedat$51milli