Guide to Analysing Companies

Initial public offering
A company’s first offering of shares to the general public. An
initial public offering (ipo), or new issue, of shares is often a
difficult time for a company and its founders. Not only do they
have to contend with the demands of the investment banks,
brokers and other professional advisers acting on their behalf,
but they also have to adjust their horizons to the medium and
short term, because from the word go, the market will look for
evidence of growth in earnings, which in turn is used to
justify an increase in the share price. It is not just the company’s
founders who will seek to cash in some of the rewards of their
creation. Venture capitalists and specialists in private equity
frequently take advantage of an ipo to realise some or all of
their profits (if there are any) from backing the company
while it was privately owned.
Insider dealing
Dealing in shares with the benefit of inside information; that
is, information not yet known to the general public. In some cir-
cumstances, insider dealing is a crime, but it is a difficult one to
prove. In cases where there is a conviction, the courts rely on
somebody else – a confidant or fellow director, perhaps – to
confirm that the accused did indeed act on knowledge that had
yet to reach the public domain. Insider dealers can be prose-
cuted not just for buying shares on good news (and therefore
profiting from a rise in their value), but also for selling part, or
all, of their holding on bad news (and so successfully reducing
their losses).
Stealing too fast.
Calvin Trillin’s definition of insider trading
Instalment credit
A loan that is repaid over a period in regular, equal instal-
I
INSTALMENT CREDIT
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ments. Such loans are most often used to finance consumer pur-
chases, but they are also sometimes used in trade finance. In-
stalment credit differs from hire purchase. In hire purchase,
consumers hire the goods until they have paid off the loan; with
instalment credit they own the goods throughout the time that
they are paying off the loan.