Backdoor Listing

A technique used by a private company to become a public company without going through the customary initial public offering process. Such transactions typically involve the private company being merged into a public shell company. Also known as a ‘reversing-in’ process. In the UK, commonly known as a ‘reverse takeover’ or ‘RTO’. See ‘Shell’.

Balloon Note

A form of promissory note requiring repayment of little or no principal until the final payment. See ‘Balloon Payment’.

Balloon Payment

The final payment under a balloon note, commonly representing a large portion of the principal. See ‘Balloon Note’.

Basis

An investor’s total investment in an asset, including purchase price, commissions and other expenses, used to determine capital gains and capital losses for tax purposes. Also called cost basis or tax basis. Also the difference between the cash price and the futures price of a given commodity.

Basis Point

One hundredth of a percent (0.01%). Used to measure changes in or differences between yields or interest rates.

Bearer Securities

Shares of capital stock or bonds evidenced by certificates that are not registered in any name. They are negotiable without endorsement and transferable by delivery. Bearer securities often carry numbered or dated dividend coupons. See ‘Registered Securities’.

Beneficial Owner

The person who enjoys the economic benefits of ownership of securities, although the securities may be registered in another name.

Best Efforts Underwriting

(USA) An underwriting arrangement in which an underwriter agrees only to use its best efforts to sell the securities as the issuer’s agent. The underwriter does not purchase the securities itself and has no obligation to purchase any amount not purchased by investors. In the UK, such a limited duty of an underwriter would be described as being on a ‘reasonable endeavours’ basis. See ‘All-or-None’ and ‘Firm Commitment Underwriting’.

Best Execution Requirement

The obligation of market makers, broker/dealers, and others to execute customer orders at the best price currently available, usually with reference to the then-current market price.

Beta

A statistical measure of a security’s volatility as compared to the overall market (a beta lower than 1 would indicate less volatility than the general market; a beta of greater than 1 more).

Black-Scholes Formula

(USA) A statistical method of estimating the present value of stock options or warrants based upon the exercise price, fair market value of the underlying security, the length of the exercise period of the option or warrant, and the volatility of the underlying security.

Blank Cheque Preferred Stock

(USA) Authorised preferred stock, the terms of which are left open under the company’s organisational documents, allowing the board of directors to fix the terms without stockholder approval. Blank cheque preferred stock may be used as an anti-takeover device. See ‘Anti-Takeover Provisions’, ‘Poison Pill’, ‘Shark Repellent’ and ‘Staggered Board of Directors’.

Blue Chip

Generally accepted as referring to stock or shares of a large company with a solid record of stable earnings and/or dividend growth and a reputation for high quality management and/or products. More generally, anything of very high quality.

Blue Sky Law

(USA) State laws regulating the offer and sale of securities and the registration of broker/dealers. All securities issued by a company must be offered and sold in compliance with or under an exemption from blue sky laws and regulations of each state in which securities are sold. The name ‘blue sky’ comes from the preamble to an early Wisconsin law designed to prevent companies from selling pieces of the blue sky to unsuspecting investors.

Board Minutes

Minutes of the meetings of the board of directors that record actions taken, typically written after a board meeting and approved at the subsequent meeting.

Bond

A debt obligation, often secured by a mortgage on some property or asset of the issuer.

Book Manager

The lead managing underwriter who maintains the Book. See ‘Book’.

Book or Syndicate Book

The list of investors who have indicated an interest in purchasing shares in a public offering maintained by the lead managing underwriter during the offering process. See ‘Hard Circle’.

Book Value per Share

A company’s net worth (assets minus liabilities) divided by the number of shares outstanding. Tangible book value is the company’s net tangible worth (tangible assets minus liabilities) divided by the number of shares outstanding. See ‘Fully Diluted Earnings Per Share’.

Bookbuilding

Process pursuant to which the lead underwriter(s) in a public offering solicit institutional and retail investors to commit to subscribe to shares prior to the closing of the offering.

Book-Entry Securities

Securities whose ownership is evidenced by an entry on the books of the issuer or the transfer agent and not by physical certificates.

Bookrunner

The underwriter in charge of the bookbuilding process.

Bridge Loan, Bridge Financing, or Bridge Round

A loan or equity investment to provide financing for a relatively short time period until the issuer can complete a longer term financing such as a public offering.

Bring-Along Rights

Contractual rights pursuant to which minority shareholders are required to sell their securities in connection with a sale by the majority shareholders. Such rights typically apply in connection with an acquisition transaction such as a sale of all the shares of stock or a sale of all or substantially all the assets of a company. Also known as “drag-along rights.”

Bring-down Letter

A letter confirming, as of a later date (usually the date of a closing), the representations, warranties, or covenants made at an earlier date in a legal document.

Broker

One who acts as an intermediary between the buyer and the seller of securities.

Broker/Dealer

Any individual or firm, other than a bank, which is engaged in the business of buying and selling securities for itself and others. In the USA, broker/dealers must register with the SEC as well as with the states in which they conduct business.

Burn Rate

In venture capital financing, the rate at which a start-up company spends capital to finance operations before generating positive cash flow from operations.

Buy Side or Buy Side Trader

The individual within an institutional investor who affects trades (particularly securities purchases) for the institution.

Buyback

A corporation’s repurchase of stock or bonds it has issued. Also the purchase of a long position to offset a short position.

Buying on Margin

See ‘Margin’.