What is a stock?

 When you buy stock, you become part owner of the company  Not all companies trade publically, so you can’t buy stock in everything out there ◦ Small businesses are an example of private businesses ◦ Companies like Facebook and Twitter just went public a few years ago  Companies go public when they can’t expand at the rate in which the public demands ◦ They use the investments to further expansion, and grow the business

 Investors decide on whether they will purchase Common Stock or Preferred Stock  Preferred stock prices tend to be more stable, and you get your investment back if company fails  Common stock allows the investor to have a vote in company decisions

 Dividend ◦ Part of a company’s profits paid to stockholders  Common Stock ◦ A share of a company that doesn’t guarantee a dividend. More risk, more reward, voting rights  Preferred Stock ◦ Share of ownership in company, less risk, less reward, guaranteed dividend, no voting rights  Earnings ◦ The amount of money that remains after subtracting the company’s expenses from revenues  IPO ◦ Initial Public Offering. The first sale of stock to the pubic by investment bankers

 Private Company ◦ A company owned by an individual, family, small group, that does not sell stock to public  Think of a sole proprietorship and partnership  Public Company ◦ Company owned by investors to buy shares of stock, and have partial ownership of company  Facebook, Twitter, Sony, Amazon, Google, etc  Risk ◦ The chance of losing all or part of investment  Tombstone Ad ◦ Ad in financial publication such as the WSJ, that announces IPO

 What is the best sneaker on the market? Why?  How do you know it’s the best?  Would you then want to own part or all of the company?  Why would a company like Nike or Apple give up part of their company by selling stock?  Complete Activity 1 in SMG groups

 Select 5 products you are familiar with ◦ What companies make these products? ◦ Which are public? Which are private? ◦ Name 2 other products these companies make ◦ Go to Yahoo Finance and look up the public companies  Describe how well each company did in the market for 2014 ◦ Which of these companies would you invest in? Why?

 Activity 2 ◦ Problems #1-2  Activity 3: A Tale of Two Companies

 In your journal: ◦ In your group, discuss which type of stock you feel is a better investment for the SMG (common or preferred). Write down your reasons in your journal. We’ll discuss some as a class if there’s time.