Unit 13 stocks, shares and take-overs

Section A. Your task: Read the text. Copy out words pertaining to the field Stocks, shares and take-overs to start forming your own glossary on the topic. Answer the questions below. Be prepared to produce a sight translation in class.

Give a summary translation of the text.

Essential Ingredients

Before a business can function two ingredients are essential: people and money. Without either, no business could take off.

For the limited company, funds are initially provided by the shareholders. Ordinary stocks* (or shares) are commonly described as 'equities', indicating that the holders are entitled to what is left of the assets and profits, after certain claims have been met.

The stock is broken down into units of, say 50p each, which is then described as the nominal value. This is the value used for the calculation of dividends. So, if a dividend of 10 per cent is paid on a 50p stock unit, the dividend* will amount to 10 per cent of 50p, i.e.* 5p per unit.

The dividends on ordinary stock will be related to the profits made by the company. Thus, if the profits are good the ordinary stockholder can expect to receive an attractive dividend. However, before the dividend is paid the directors of the company may wish to recommend part of the profits being ploughed back into the business.

The fact that dividends normally vary in line with profits gives the person who holds ordinary stock some possible protection against the falling value of money – another description for inflation.

This hedge against inflation operates in the following manner. In the case of a typical manufacturing company, where there is a rise in the cost of raw materials and wages, the company can usually compensate for this by raising the price of its finished goods. In this way its profits can be increased, wholly or partially, in line with the general rate of inflation.

Ordinary stocks normally, but not invariably, carry voting power. Some stock units are even issued which give more than one vote per stock unit, but multiple voting stock, as it is called, is not common. Some investors are willing to accept non-voting ordinary stock (usually designated “A” stock) on the grounds that they do not wish to exercise voting power in any case. However, when there is a take-over in the offing, the voting stocks will become more valuable and, for this reason, the market price of the voting stocks would be expected to stand at a premium in relation to the price of the non-voting stocks.

Whoever owns more than 50% of the voting stock is sure of controlling the elections to the board of directors. Yet many boards own much less than this proportion of voting stock between them. They are still able to select their own replacements for any directors who die or retire, since other groups of shareholders will be disorganised and unaware of the issues and personalities involved.

The existing board of directors in a large public limited company (plc) are likely to remain in effective control so long as the company's performance satisfies the majority of the voting shareholders. But if the company falters there could be a stockholders' revolt leading to the replacement of the existing board – or at least elements of it.

Your task

Now complete each of the following sentences with one of the words listed below.

1. Ordinary stocks are usually described as ……………. .

2. If the company's …………….. rise the ordinary stockholders can expect a good ………… .

3. If shares do not carry voting power they are unlikely to increase in value as a result of a ………………… bid.

4. If a company's profits fall drastically the ……….…… might change the board of …………….. at the next Annual General Meeting (AGM).

5. Ordinary stocks can be expected to provide a useful ………..……………. against inflation.

6. A company's board of directors is likely to retain ………………. of the company so long as they make reasonable profits.

The missing words: shareholders, equities, hedge, dividend, directors, control, profits, take-over

Y ou know that fellow Heatherington-Smythe you sacked last month? He's using his redundancy pay for a take-over bid.

Section B. Fill in the blanks

Your task: Fill in the blanks in this passage, using words from the list given below.

substantial	prepared	mortgage*
elected	nature	surprise
devoted	attractive	major
bidder	unprofitable	described
worthless	wound	acquired

The Football Business

In Britain the football clubs in the national leagues are run by limited companies. The ……….. decisions are therefore made by the board of directors, and the directors are ………… by the shareholders as in any other company.

Some clubs are successful and make ……………. profits. Most have perennial cash flow problems. Having discovered a talented player, they are obliged to offer him to the highest ………. in order to meet their debts.

If the football business is generally so ………….., why are there so many highly successful business tycoons prepared to 'bale them out'?

Before we answer that question we should look at the ……….. of the club's assets. There are usually at least a couple of acres of potentially valuable building land. Often the shares can be …………… cheaply because the club, languishing in the lower divisions, never makes a profit.

Is it any ………… then that there are sometimes builders and developers who are prepared to buy the apparently …………….. shares? If the club succeeds, the shares go up in value. If the club fails, the company is ………….. up and the major shareholder has some valuable land to develop. It could be …………. as a win-win situation.

This can be such an …………. proposition that the entrepreneur, in addition to buying shares, might be ………….. to lend substantial sums to the club – no doubt taking a ……….. on the land as security. In the circumstances it is difficult to know whether an offer of financial help is coming from a genuinely ………….. fan of the club or someone who has an eye for a bargain. A wolf sometimes wears sheep's clothing!

Section C. Opposites and synonyms

Each of the words highlighted in the passage has a synonym in the list of words below. You are invited to match them.

before	discussed	supporters	control	factor
interesting	unreal	wrongdoers	misinformed	periods
increase	cost	undiscovered	technique