Equity Markets Common Stock: Represents ownership in a corporation. When firm goes bankrupt, common stock would be paid less with the leftover assets (riskier than debt or preferred shares). Legally, shareholders’ liability for the debts of the firm is limited to their investment (max is 100%) Common stock shareholders may vote with their shares to elect the members of the board of directors. Dividends: Interest payments to shareholders. Dividend Imputation: introduce by Nz&Aus to encourage investment, prevent double tax on dividends. Preferred Stock: hybrid security combining features of both debt (fixed dividends) and equity (potential appreciation), and has a prior claim on earnings and assets compared to a common stock but ranks bellows all debt and other creditors. Usually as no maturity date. Dividends paid on preferred stock are not tax deductible like interest on debt. preference shares (cannot vote) get money before ordinary share (can vote). Convertible Securities: An investment that can be converted to common stock at specific common price or number of shares. The most common convertible securities are convertible bonds (pay a fixed periodic amount as a coupon payment) or convertible preferred stock (pay a preferred dividend). Primary Equity Markets - where securities are first issued; firms can raise funds. Initial Public Offering (IPO) - first time share are sold in the primary market (called floating the company or going public), then shares are listed on secondary market. Seasoned Offering - additional shares may be sold later. Equities may be: Sold directly to investors Purchased for a guaranteed amount (net proceeds) and sell at higher price by banks (gross proceeds) in an underwritten offering. Sold to existing shareholders Rights Issue: an entitlement to purchase a new share from