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S Corporation (or Sub-chapter S Corporation)
(USA) A small business corporation permitted to be taxed substantially, as
if it were a partnership or individual proprietorship (no corporate tax; corporate
losses can be claimed by the shareholders and corporate profits are taxed directly
to the shareholders). See ‘C Corporation’ and ‘Limited Liability
Company’.
Schedule 13D
(USA) A form required to be filed with the SEC by any person or
entity that acquires a 5% or greater ownership interest in a public
company, setting forth identifying information about the investor,
the source of funds used to purchase the securities and, most importantly,
the investor’s intent with respect to attempting to take
control of the issuer.
Schedule 13G
(USA) A shorter form than Schedule 13-D that some 5% owners who
do not intend to assert any control can file in lieu of filing
a Schedule 13D. Also used for persons who acquired their 5% interest
prior to an issuer’s IPO.
SEC
See ‘Securities and Exchange Commission’.
Second Preferred Stock or Shares
Preferred stock that has rights subordinate to those of other preferred
stock on dividend and assets. Also referred to as ‘Subordinate
Preferred Stock or Shares’.
Secondary Distribution (or Secondary Offering)
A public offering of a security by a selling holder of securities.
The term secondary offering is also sometimes used more generally
in reference to any public offering other than an IPO. See ‘Primary
Distribution/Shares’ for comparison and ‘IPO’.
Secondary Market
A market or exchange in which securities are bought and sold following
their initial sale. Investors in the primary market, by contrast,
purchase shares directly from the issuer.
Section 16
(USA) A provision under the Securities Exchange Act of 1934 regulating
trading by corporate insiders. It provides that any profit realised
by an insider from any purchase and sale or sale and purchase of
stock of such company within any period of less than six months
shall be deemed to belong to and to be recoverable by the company.
Section 16 provides for strict liability, and the intentions of
the insider will not be considered in any action by the company
to recover profits. Section 16 also requires insiders to report
all trades in a company’s securities. See ‘Short Swing
Profits’ and ‘Reporting Company Forms/Forms 3, 4, and
5’.
Secured Obligation
A debt obligation that is secured by the pledge of assets.
Securities Act of 1933 (also ‘1933 Act’ or ‘33
Act’)
(USA) A federal law regulating the offer and sale of securities
by the issuer or its affiliates. It generally requires issuers
seeking to raise funds from the public to provide investors with
extensive information. Its liability provisions, particularly for
incorrect registration statements, create a liability rule of ‘caveat
vendor’ or ‘let the seller beware’.
Securities and Exchange Commission (SEC)
(USA) The primary USA federal regulatory agency for the securities
industry, whose responsibility is to promote full disclosure and
to protect investors against fraudulent and manipulative practices
in the securities markets. The SEC enforces, among other acts,
the Securities Act of 1933, the Securities Exchange Act of 1934,
the Trust Indenture Act of 1939, the Investment Company Act of
1940, and the Investment Advisers Act. The supervision of dealers
is largely delegated to the self-regulatory bodies of the exchanges.
Securities Exchange Act of 1934 (also ‘1934 Act’ or ‘34
Act’)
(USA) A federal law that regulates stock markets, trading in stock
markets, and on-going disclosure by public companies traded on
those stock markets.
Seed Capital
Initial capital for a start-up venture, usually provided by the
founders, friends, or relatives, but that also may be provided
by seed venture capital firms. Typically seed capital is provided
in order to develop a business concept before a company is started.
Self-Regulatory Organisation (SRO)
Non-government organisation that has statutory responsibility to
regulate its own members through the adoption and enforcement of
rules of conduct for fair, ethical, and efficient practices. Examples
include NASD and the national securities and commodities exchanges.
Senior Debt
A debt instrument that expressly has a higher priority for repayment
than that of general unsecured creditors. Typically used for long-term
financing for low-risk companies or for later-stage financing.
See ‘Subordinated Debt’.
Share Capital
See ‘Capital Stock’.
Shares Outstanding
See ‘Outstanding Stock’.
Shark Repellent
Defence mechanisms or tactics designed to discourage undesired
takeover bids. See ‘Anti-Takeover Provisions’, ‘Blank
Cheque Preferred Stock’, ‘Poison Pill,’ and ‘Staggered
Board of Directors’.
Shelf Registration
(USA) A registration statement that covers securities that are
not to be sold in a single offering immediately upon effectiveness,
but rather are proposed to be sold over a period of time or on
a continuous basis. A similar concept is included in the prospectus
directive. See ‘Prospectus Directive’.
Shell
The term ‘shell’ typically refers to a corporation
that has been duly organized and is currently in existence, but
that currently has no business operations.
Shoe
See ‘Green Shoe or Shoe’.
Short Form Report
In the UK, the report on the accounting and financial history and
position of an issuer by its auditors, normally based on its last
three years’ published financial statements and reproduced
in a prospectus or other offering document. See ‘Long Form
Report’.
Short Sale
Borrowing a security (or commodity futures contract) from a broker
and selling it, with the understanding that it must later be bought
back (hopefully at a lower price) and returned to the broker. SEC
and NASD rules limit when investors can sell short.
Short Swing Profits
A term used in reference to profits realised by insiders from buying
and selling a company’s securities within a specified period.
In the USA this period is six months, and any profits are subject
to recovery by the company under Section 16 of the Securities Exchange
Act. See ‘Section 16’.
Sinking Fund
An annual reserve of capital required by the creditor to be set
aside out of a company’s current earnings to provide funds
for retirement of an outstanding bond issue.
Soft Market
A market for securities in which supply exceeds demand. A dramatic
rise in new issues of securities may create a soft market, leading
to a general reduction in share prices and difficulty in placing
new offerings of securities.
Sole Proprietorship
A business operated directly by an individual, without the use
of any legal entity.
Spinoff
The creation of a new independent company from an existing company
by the transfer of the assets of one or more business units or
product lines of the company to a new corporation and the distribution
of stock of that new corporation to stockholders of the old one.
Spinout
The creation of a new independent company by a university or government
agency technology transfer unit whose purpose is to commercialise
technology developed at such university or government agency.
Split or Stock Split
An increase in the number of outstanding shares of a company’s
stock, such that the proportionate equity of each shareholder remains
the same. The market price per share theoretically should drop
proportionately. Usually done to make a stock with a very high
per-share price more accessible to small investors. Requires approval
from the board of directors and sometimes shareholders.
Sponsor
In the UK, this term refers to the sponsor to an issuer on the
Official List of the London Stock Exchange.
Spread
The difference between the current bid and the current ask (in
over-the-counter trading) or offered (in exchange trading) of a
given security; also called ‘bid/ask spread’. More
generally, the difference between any two prices. Also, the purchase
of one option and the simultaneous sale of a related option, such
as two options of the same class having different strike prices
and/or expiry dates. See ‘Inside Spread’.
SRO
See ‘Self-Regulatory Organisation’.
S Corporation (or Sub-chapter S Corporation)
(USA) A small business corporation permitted to be taxed substantially,
as if it were a partnership or individual proprietorship (no corporate
tax; corporate losses can be claimed by the shareholders and corporate
profits are taxed directly to the shareholders). See ‘C Corporation’ and ‘Limited
Liability Company’.
A board of directors divided into classes (typically three)
elected for multiple-year terms, with classes coming up for
re-election
on a staggered basis. A staggered board may be used as a form
of anti-takeover device. Also known as a Classified Board.
See ‘Anti-Takeover
Provisions’, ‘Blank Cheque Preferred Stock’, ‘Poison
Pill,’ and ‘Shark Repellent’.
Standard & Poor’s 500 (S&P 500)
A market-value weighted index of the 500 largest stocks in the
USA markets that is maintained by Standard & Poor Corporation.
Generally considered to be a benchmark of the overall USA stock
market. See ‘Index’.
Start-up
A company at its initial stages of development – even before
set-up – that typically has little or no earnings and revenues.
Start-up capital is typically provided for product development
and/or initial marketing.
Sticky Deal
An issue of securities that the underwriter or the underwriting
syndicate believes will be difficult to sell in the market.
Stock Options, Incentive
See ‘Incentive Stock Options’.
Stock Options, Non-qualified
See ‘Non-qualified Stock Options’.
Stock Power
A power of attorney enabling a person other than the owner to transfer
stock ownership to another party. A stock power is sometimes granted
when stock is pledged as collateral for a loan.
Stockholder Agreement
An agreement among stockholders, typically in a private company,
to ensure maintenance of stable ownership and management of a company
for the life of the investment. Venture capital investors will
typically require a stockholder agreement that may cover, among
other things: a right of first refusal in favour of the issuer
or other stockholders on a proposed sale by a stockholder of his
or her stock, a right to participate in insider sales (i.e. sales
by existing shareholders); an agreement to elect certain directors;
and provisions as to buyout.
Stop Order
(USA) An order issued by the SEC suspending the order of effectiveness
of a registration statement because of misstatements in the registration
statement or other improper activities by an issuer or its underwriters.
Sales of new securities after issuance of the stop order will violate
the Securities Act of 1933.
Street Broker
An over-the-counter broker or ‘OTC broker’, as opposed
to an exchange member.
Street Name
A term used to refer to securities beneficially owned by individual
investors, but registered in the name of a nominee of a securities
or brokerage firm such as Cede & Co., which are then allocated
within that firm to the accounts of individual investors who purchase
the securities. See ‘Cede & Co’.
Street or ‘The Street’
A shorthand reference to Wall Street or to the consensus opinion
of the financial community generally. Often in the form ‘The
Street likes...’ or ‘The Street doesn’t like...’.
In the UK, ‘The City’ is used in the same manner.
Strike Price
The stated price per share for which the underlying security may
be purchased (calls) or sold (puts) by the optionee upon the exercise
of the optionee.
Strong Market
A securities market in which buyers outnumber sellers and stock
prices trend upwards.
Sub-chapter S Corporation
See ‘S Corporation’.
Subordinated Debenture
A debenture expressly subordinated to other obligations of the
issuer. A subordinated debenture may be subordinated to other debt
instruments or even to general creditors. It is frequently convertible
into, or accompanied by warrants to purchase, common stock.
Subordinated Debt
Debt that expressly has a lower priority for repayment than other
debt, i.e., it may not be repaid until the senior debt has been
repaid. See ‘Senior Debt’.
Syndicate
The group of underwriters that will become legally obligated to
purchase securities in a firm commitment public offering. Also
the department within the lead underwriter’s firm that compiles
the book. See ‘Book or Syndicate Book’.
Syndicate Book
See ‘Book or Syndicate Book’.
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