Bank J. Safra (Switzerland) Ltd - Products

A security representing a stake in the share capital of a public limited company and entitling the holder to membership rights and economic rights. The shareholder has rights of participation (voting right, right to information) and rights to assets (right to a share of profits, subscription rights).

A company can distribute periodically, at its own discretion, a portion of its earnings, cash flow or capital to shareholders, in cash or additional stock, called dividend payment.

Stocks can be purchased through a broker who goes to a stock exchange to buy/sell these shares for the customer. The most well known stock exchanges are the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX), the NASDAQ exchange, the London Stock Exchange (LSE), Euronext, Swiss Exchange (SWX). The share size and capitalization of the company, among other factors, determine where the company's stock is traded.

Blue chips

Term used to describe equities of leading companies with high credit ratings, high market capitalisation, strong earnings power and sound financial structure.

Small Caps

Companies with publicly traded stock that have market capitalization of less than $1 billion and which are generally more volatile than large caps.

Preferred Shares

Preferred Shares are shares representing an ownership interest in a company that has "preference" over common stock shares. Preferred shares are similar to a bond issued with a rate of interest but no maturity. Most buyers of preferred stock are large corporations, or investors seeking a steady flow of dividend income rather than share price appreciation. When a preferred stock is purchased, the company has already set the dividend. Paid on a quarterly basis, the dividend payment does not fluctuate in price, and does not depend on how well the company is performing. If the company goes bankrupt, claims from preferred shareholders are satisfied before those of common shareholders.

Warrants

A warrant is a long dated option which allows the owner to participate in the capital gains (losses) of a firm without buying the common stock. In effect, the holder of a warrant has a leveraged play on the corporate common stock. As a form of option, a warrant has an exercise price and an expiry date. The exercise price is the price at which the holder may convert the warrant into common shares of the issuer. The expiry date is the last date on which the warrant may be converted into common shares. Given that a warrant is generally issued to reduce the cost of a debt issuer, the expiry date is usually more than two years from issuance. This allows warrants to trade separately from the bond with which they were issued, thereby providing the investor with a long dated option on a firm's common stock. There is a drawback to warrants for those investors concerned with income. As an option, a warrant does not pay a dividend, and is subject to a certain amount of price compression as the underlying stock approaches or surpasses the exercise price.

This is only a factor if the investor is purchasing the warrants when the common stock is trading near the exercise price. Warrant holders have no voting rights until the warrants are converted into common shares. Upon conversion an active role may be taken in corporate governance. If the warrants provide for conversion into preferred shares, it is unlikely the holder will gain any influence on corporate governance upon conversion.