Equities

Private Companies vs. Public Two main private corporate structures Privately Held LLC Public structure Shareholders SEC and other regulatory commissions What is better? Why would a company become private? There are two main corporate structures of private companies. The one is simply a corporation. This is where there are a select few owners or investors that each own part of the company. The corporation makes profits and those are distributed to the owners based on percentage of ownership. Unlike a standard privately held corporation LLC differs, primarily from a tax standpoint. LLC has the same ownership structure, meaning that there are a few people who own the company. Instead of the company making money and filling for corporate taxes, the profits are passed through to the individual owners. These owners then file for income taxes based on their percentage of the corporate profits Public structure is very different: a public company is comprised of many shareholders as well as institutional investors. All public companies are governed by the SEC along with other regulatory commissions What

Public vs. Private Public Private Greater access to capital Access to debt Use stock as currency (Compensation) Legitimacy Private Less regulation Decisions are made by owners Choose your investors Limits downside risk

Private to Public IPO – Initial Public Offering Raise capital through public markets Shares + Fees Cash + Valuation Cash Shares Cash Shares Underwriter (i.e. Investment Bank) Public Investors – Primary Market Public Investors – Secondary Market Private Company Shares

Stock Exchange National Exchange vs. OTC OTC Can anyone name a national exchange? Auction style market place Many buyers and sellers OTC Order driven Buyers > Sellers (Inventory)

Market Makers and Price Movement Bid-Ask Spread Bid Price – Seller Ask Price - Buyer Market Makers Commission Hold Shares, Immediate offset Market Maker Spread

How the Market Moves.. = Highest Lowest - > Trade! 300 @ 97.99 400 @ 97.88 100 @ 97.46 200 @ 97.44 150 @ 97.34 600 @ 97.24 200 @ 98.18 300 @ 98.30 400 @ 98.56 300 @ 98.80 175 @ 98.97 400 @ 99.12 Offer to Buy BID Offer to Sell ASK Lowest Highest - > Trade! 200 @ 98.08 = - > New Bid-Ask = $0.19 Explain market vs. limit

Shareholder Toolkit Dividends Splits Buybacks Corporate profit sharing Make more affordable Add liquidity Buybacks Management thinks undervalued What does it do to EPS and price of remaining shares? Price of Remaining Shares EPS

Type of Shareholders Preferred Common Generally greater dividends No voting rights Common Voting rights Standard dividends Payout last

Delisting and Liquidation Voluntary Delisting Buyout (i.e. NYSE:TSL) Merger forms new public company Involuntary Delisting Below $1.00 for 30 consecutive days Still Trades OTC General failure to meet regulations Bankruptcy

Liquidation Bank Loans Bondholders Preferred Shareholders 1st 2nd Bondholders 3rd Last Preferred Shareholders Common Shareholders

Types of Listings Common stocks Mutual funds Index funds ETFs ETNs

Mutual Funds Bundle of stocks, bonds, etc. Fees associated, % of investment, profit, or both Actively managed by PM Priced at end of day based on NAV

Index Funds Portfolio constructed to match index Broad market exposure Low operating expenses Low portfolio turnover

ETFs Exchange Traded Fund Track index, commodity, etc. Bought and sold like common stock Do not price based on NAV (Sold at premium or discount) Higher liquidity Tracking error due to buying and selling of underlying

ETNs Alternative to ETF Track an underlying asset Subordinated debt issued by a company (Barclays) Not backed with collateral Tied to credit risk of issuer Default risk very much alive Does not rely on buying or selling of underlying Priced at maturity based on underlying

Market Cap Market cap is the market value of a company Outstanding shares * Share Price What are some of the largest companies by market cap?

Top Ten

News Recap

Trump and Peso Trump’s immigration plan and renegotiation of NAFTA threatens the Mexican Peso

Trump and Volatility The possibility of non-partisan, unprecedented legislation has brought with it fresh uncertainty within financial markets VIX = 100*sqrt(30-day expected variance on S&P) Expected 30-DAY variance is calculated by options prices on S&P for 30-day range