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1 Stocks and shares

7
Aims
Q Consider the uses of stocks and shares and ways of talking about price changes Q
Discuss different possible investments

Lead-in

if you have money to invest, what are the advantages and disadvantages of:
putting it under the mattress buying a lottery investing in property or real estate
ticket buying bonds
taking it all to Las Vegas or Monte Carlo buying stocks or shares
depositing it in a bank buying gold investing in a hedge fund
buying a painting (Matisse, Van Gogh, etc.) giving it away?

Stocks and shares Unit 17 86

 Finance
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Reading: Stocks and shares

Match up the half-sentences below, which make up a text about stocks and shares.
Successful companies can issue stocks or shares
(certificates representing part ownership of the
company)
2 Offering these stocks for sale to financial institutions
and the general public changes the business
3 Selling stocks for the first time is called an IPO or initial
public offering in the US
4 Companies use an investment bank to find buyers, and
to underwrite, the stock issue,
5 Stocks .and shares .are also known as equity or
equities; the most common form
6 After shares have been issued they can be traded on
the secondary market at
7 Some stock exchanges have automatic
computerized trading systems that match up buyers
and sellers; others have market makers -
Stock prices rise and fall depending on supply and
demand,.
Consequently the nominal value of a s
price written on it - is rarely the same
price -
10 Companies either distribute part of th f
shareholders as an annual dividend,
11 Stock markets are measured by stock indexes (or
indices),
12 A period during which most stocks (and the stock index) are rising is called a bull market,
A and a flotation or an IPO in Britain. B and
one in which most of them fall in
value is a bear market.
C the stock exchange on which the
company is listed or quoted.
D from a private to a public company, and is
called going public.
E i.e. how many sellers and buyers there
are.
F i.e. to guarantee to buy the stocks if there
are not enough other buyers.
G is called common stock in the US, and
ordinary shares in Britain.
H or keep the profits in the company, which
also causes the value of the stocks to rise.
! the price it is currently being traded at on
the stock exchange.
J to raise capital to expand their operations.
K traders in stocks who quote bid (buying)
and offer (selling) prices.
L which show changes in the average prices
of a selected group of important stocks.

Discussion
1 Many economists argue that it is (theoretically) impossible to regularly outperform the stock market, as all available information is
already factored into a company’s share price. So analysing a company's finances, or trying to discover or predict patterns in price
movements, is a waste of time. What implications does this have for investors?
2 Imagine that you have just come from a secret meeting of a company's board of directors, which has made a decision that you
know will financially ruin some close friends of yours unless they can sell some shares before the board’s decision becomes
known. You are having dinner at their home that same evening. Should they expect you to warn them? Should you do so?
3 How can you make money from a falling stock market (when prices are going down)?

87 Unit 17 Stocks and shares

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Listening: A financial news report ►

2.3
Listen to an extract from a financial market report on an American radio station. The newsreader mentions the prices
of the following securities, currencies and commodities. In each case, does she say that the price has risen, fallen, or
stayed almost the same?

—
British and American usage
The terms stocks and stockholders are used
in the
are USA,
used andUSA,
in the sharesandand shareholders
shares and
in Britain. In Britain,
shareholders in Britain.stock can also mean
In Britain,
securities
stock suchmean
can also as government bonds.
securities such asThe
terms stock exchange,
government bonds. Thestocktermsmarket
stock and
stockbroker
exchange, stockare used
marketin all
andEnglish-
stockbroker
speaking countries. The most common
are used in all English-speaking
type of equity
countries. The is called
most common
common stock
type of in
the US, and ordinary shares in Britain.
equity is called common stock in the US,
Some companies
and ordinary alsoinhave
shares preferred
Britain. Some stock
(AmE) or preference shares
companies also have preferred stock(BrE) that
receive
(AmE) or a fixed dividend.
preference shares (BrE) that
receive a fixed dividend.

“Today
share
prices fell
sharply on
the fear
that share
prices
might fall
sharply.”

www.cartoonstock.com

“Will you please try to get your mind off of the S.&P. Index?”
© The New Yorker

Stocks and shares Unit 17 88