WAYS ONE CAN INVEST IN THE CAPITAL MARKET
Normally shares are bought in lots of 100. When you give your shareholder the order to buy he will buy your shares at the best price in the market at that time through the stock exchange’s trading floor. There two ways one can invest in the shares of a company to be a Shareholder of the company. This Investment can be done through the primary or secondary market.
Primary market is when a company decides to source for more funds by issuing part of their share to the members of the public. This issue could be referred to as Initial Public Offer if the company is issuing their shares to the public for the very first time or just Public Offer if the company has been to the market before. During public offers members of the public subscribed to the shares of the company according to the terms and conditions stipulated on the offer prospectus. After the subscription stage and the offer ends, then the next stage is allotment. The prospective investor/shareholder stands the chance of getting all of the number of unit shares he/she applied for. However in event whereby the offer is over subscribed, the prospective investor may get less the number of units he applied for with a balance payment cheque returned to the prospective investor’s postal address. The allotted share is subsequently listed on the floor of the exchange for trading and that marks the end of the offer.
The prospective investor now becomes a legitimate shareholder of the company.
Secondary market is when a prospective investor/shareholder decides to invest in a particular company, and unfortunately the company has no plan to come to the capital market in the nearest future to source for fund via the primary market window. The prospective investor will not wait for the company until they come to the market.
All the investor needs to do is to approach a registered stockbroker, fill the necessary forms and documentation then the broker will go to the floor and bid/source for the shares of the company where the investor wants to invest. If the shares of the company are listed on the exchange and available at the time the prospective investor wants to invest into the company, the broker will definitely buy the required number of the share for the investors. However if it’s a company that the existing shareholders are holding on to their investment for one reason or the other, the stock may not be readily available and what this means is the investor needs to a little bit patient for the broker to sources for the number of share that he/she wants. The acquisition of these shares by the broker for the investor automatically makes the investor a potential shareholder of the company and he/she is entitled to all the benefits of a share holder.
These shares which were acquired via the primary market must be dematerialized or verified and credited to a dedicated account called central security clearing system created for the investor by the broker. However if the investor already have an account with a stock broking firm, the allotted shares will be credited directly into the investors account domicile in the stock broking firm. It is at this stage that the investor can now think of selling the shares allotted to him/ her to get his/her money back anytime. What these means is that shares acquired via the secondary market can easily be converted to liquid cash by an investor who want to take profit in the market or an investor who is a speculator/ short term trader. The Investor that invested via the primary market usually gets to buy at a discount because public offers always come at a discount. However he/she will have to wait until the offered shares are allotted and admitted on the exchange before he/she can sell to take profit or access his/her money back. The share can be credited electronically or via the issuance of certificate of shareholding.
RESPONSIBILITY OF A STOCKBROKER TO CLIENTS (RULE 99 OF SEC)
(Securities and Exchange Commission Nigeria)
Selfless and qualitative investment advisory services
Personal knowledge of the client. Rule 100 SEC, Article 102
Issuance of contract note within 24 hours of executing a sale or purchase instruction.<br />
Proper processing of certificate request form and onward delivery to the register via the Central Security Clearing System for clients that demand for share certificate of securities already in Central Security Clearing System
Issuance of quarterly report of account details
Prompt payment on the T+3 (Transaction +3)
Prompt execution of mandate within five (5) working days.
Maintenance of separate clients account.
Lodgments of buyers transfer form with the registrar through the CSCS, so that the register will capture their signature.
There is a lot of benefit that to one enjoys as a shareholder among which are: This is a situation where a company makes profit and decides to share all or part of the profit to the shareholder who are the owners of the company. The amount of money you get is a function of the number of units of shares the person has in his/her portfolio. The more money you invested in a company the more money you get when dividends are declared. Profit sharing of the company could be quarterly, half yearly and yearly. However there are situations where a company makes profits and decides not to share its profit for that financial year, what this means is that the company is building up its reserve for future investment objectives or to offset debt as the case maybe. Similarly if a company is not doing well, there is a possible that the company may not break even in a particular financial year and may have registered loss after and before tax when compare with the previous financial year. Such companies cannot declare dividend since its books is at red.
This is a situation where a company makes profits and decides to increase its share capital by rewarding the shareholders with bonus share. Bonus shares are free because the shareholders do not pay for them. However when a company declares bonus, they pay for the bonus share declared from their reserves or profit made in that financial the bonus was created year. The bonus declared add up to the share capital of the company and the company should make sure that the earning per share is sustain in the next financial year so that the bonus share will not impact negatively on the financial books of the company The bonus share declared add up to whatever number of share the shareholder has with the company. If a shareholder, Mr. Akin has 5000 units of ABCD Company for instance and the board of directors recommends a bonus share of 1 for 5 which was financial approved by the shareholder. What this means is that Mr. Akin gets 5000/5=1000 units of ABCD Company shares as his share of the bonus declared. The total number of outstanding share that Mr. Akin has with ABCD Company is 5000+1000= 6000 units. Mr. Akin may decide to sell part or his entire bonus share (1000) or may even decide to sell the whole of the 6000 units or part of it. The choice is his. This is a situation whereby a company decides to source for fund to do more business with. The Board of directors may decide to source for such fund within the inner calculus of the company. By inner calculus in mean the shareholder of the company. The Directors did not deem it fit to invite unknown persons or members of the public to contribute to the needed fund. May be the directors of the company are scared of a possible takeover if they make it needed fund and everybody thing or they just want to reward their shareholder. Whatever is their reason, the good thing is that right issues are always at a discount to the prevailing market value of the company. The shareholders get to buy more of the company’s share at a subsidized rate. However the amount of share a shareholder buys is actually a function of the ratio the right issue is being issued to the shareholders.
Other benefits of being a shareholder which I may not emphasized here includes but not limited Right to be informed of the company’s annual general meeting (AGM) some weeks to the (AGM)
-Right to attend the company’s annual general meeting (AGM) or appoint a proxy to attain on ones behalf. -Right to vote in the company’s annual general meeting among others Should you desire to invest in the real estate as an enterprenuer and also to learn more on how to tap into the real estate business in nigeria visit
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