A golden share is a nominal share which is able to outvote all other shares in certain specified circumstances, often held by a government organization, in a government company undergoing the process of privatization and transformation into a stock-company.
A type of share that gives its shareholder veto power over changes to the company's charter. A golden share holds special voting rights, giving its holder the ability to block another shareholder from taking more than a ratio of ordinary shares. Ordinary shares are equal to other ordinary shares in profits and voting rights. These shares also have the ability to block a takeover or acquisition by another company.
This share gives the government organization the right of decisive vote, thus to veto all other shares, in a shareholders-meeting. Usually this will be implemented through clauses in a company'sArticles of Association, and will be designed to prevent stakebuilding above a certain percentage ownership level, or to give a government veto powers over any major corporate action, such as the sale of a major asset or subsidiary or of the company as a whole.
This share is often retained only for some defined period of time to allow a newly privatised company to become accustomed to operating in a public environment, unless ownership of the organization concerned is deemed to be of ongoing importance to national interests, for example for reasons of international security.
Special Purpose Vehicle (SPV)
Also referred to as a 'bankruptcy-remote entity' whose operations are limited to the acquisition and financing of specific assets. The SPiV is usually a subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt.
A subsidiary corporation designed to serve as a counterparty for swaps and other credit sensitive derivative instruments. Also called a 'derivatives product company.'
An initial public offering (IPO) or stock market launch, is the first sale of stock by a company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises. Many companies that undertake an IPO also request the assistance of an investment banking firm acting in the capacity of an underwriter to help them correctly assess the value of their shares, that is, the share price .
The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.
In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market.
IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values.
When a company lists its securities on a public exchange, the money paid by investors for the newly issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of investors to provide itself with capital for future growth, repayment of debt or working capital. A company selling common shares is never required to repay the capital to investors.
Once a company is listed, it is able to issue additional common shares via a secondary offering, thereby again providing itself with capital for expansion without incurring any debt. This ability to quickly raise large amounts of capital from the market is a key reason many companies seek to go public.
There are several benefits to being a public company, namely:
§ Bolstering and diversifying equity base
§ Enabling cheaper access to capital
§ Exposure, prestige and public image
§ Attracting and retaining better management and employees through liquid equity participation
§ Facilitating acquisitions
§ Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.
There are several disadvantages to completing an initial public offering, namely:
§ Significant legal, accounting and marketing costs
§ Ongoing requirement to disclose financial and business information
§ Meaningful time, effort and attention required of senior management
§ Risk that required funding will not be raised
§ Public dissemination of information which may be useful to competitors, suppliers and customers