This Week - Please Read Chapter 19
What Are Shares?
Why Do Entrepreneurs Sell Shares?
Why Do Investors Buy Shares
Rights of Ownership: Voting, Dividends, Growth in Value
Investment Banks: Help both sides
Primary vs. Secondary Securities Markets
Market Value of a Share
What Are "Shares"?
A share is a piece of paper.
It is evidence of part ownership in a corporation.
Here's a share in:
the Walt Disney Company Here's a Share in Microsoft Why Do Entrepreneurs Sell Shares?
Businesses are expensive to start
Entrepreneurs need lots of $$$
Selling shares in the business increases $$$ available
Entrepreneurs need interested and committed co-owners
Another reason why entrepreneurs sell shares:
The are selling part of their business to NEW owners.
Recent example: Wendy's Corporation sells Tim Horton's
Why Do Investors Buy Shares? Because they have spare cash
Because they want to park it somewhere
Because a share confers rights and benefits of ownership:
Right to vote at annual meetings of shareholders
Right to share in profits of business. (Typically, dividends)
Gains to value of shares (caused by the growth)
Collect, package and distribute funds from "investors" to
Advise entrepreneurs on timing, pricing and marketing of shares
Through stock brokers: sell shares to investors.
Primary securities market
Corporations helped by investment bankers and secu