FIN 501 Lecture Notes - Lecture 4: Common Stock, S&P 500 Index, Third Market
Document Summary
Both private equity funds and hedge funds: are set up as limited partnerships, pool money from investors. Invest this money on behalf of these investors: have built-in constraints to prevent managers from taking excessive compensation. Venture capital: venture capital refers to financing new, often high-risk, start-ups. If goals are not met, the venture capitalists withhold further financing. If a start-up succeeds: the big payoff frequently comes when the company is sold to another company or goes public, either way, investment bankers are often involved in the process. Lbo market activity levels depend on credit markets: around 2005, the lbo market was quite active, activity in the lbo market came to a standstill after the crash of 2008. Primary market: where investors purchase newly issued securities. Initial public offering (ipo): an ipo occurs when a company offers stock for sale to the public for the first time. Secondary market: where investors trade previously issued securities: directly with other investors.
