P
Paper
A short-term negotiable debt security or promise to pay.
Paper Profit
A profit on a security which has not been taken. Paper profits become
realized profits only when the security is sold. A paper loss is the opposite
to this. An example of a paper profit would be the purchase of ABC at
$25. It is now trading at $27, so the paper profit is $2 per share.
Par Value
The stated face value of a bond or, in the case of stock, an amount
assigned by the company's charter and expressed as a dollar amount per
share. Par value of common stock usually has no relationship to the current
market value and so no par value stock is issued. Par value of preferred
stock is significant, however, as it indicates the dollar amount of assets
each preferred share would be entitled to in the event of liquidation
of the company.
Pari Passu
This means "in equal proportion." It usually refers to equally ranking
issues of a company's preferred shares.
Participating Feature
This applies to some preferred stocks which, in addition to a fixed
rate of dividend, also share in the earnings of the company and may receive
additional dividends over and above their specified dividend rate.
Penny Stocks
Low-priced speculative issues of stock selling at less than $1.00 a
share.
Some warrants entitle the holder to acquire shares plus additional warrants
at a later date. The warrants that are received upon the exercise of the
initial warrants are known as piggy back warrants.
Points
Points apply to security prices. In the case of shares, one point indicates
$1.00 per share. For bonds and debentures, one point means 1% of par value.
Par value is almost universally 100 for bonds.
Poison Pill
A corporate provision to combat hostile takeovers. When triggered, the
poison pill allows shareholders to acquire additional shares at below
market price, thereby increasing the number of shares outstanding and
making the takeover prohibitively expensive. Such plans are relatively
new in corporate Canada and are the subject of some controversy regarding
whom they are designed to protect
Pooling of Interest
This occurs when a company issues treasury shares for the assets of
another company so that the latter becomes a division or subsidiary of
the acquiring company. Subsequent accounts of the parent company are set
up to include the retained earnings and assets at book value (subject
to certain adjustments) of the acquired company.
Portfolio
The entire combination of securities or investments an individual or
institution holds. A portfolio can contain a variety of government and
company bonds, preferred and common stocks from different businesses and
other types of securities and assets.
Preferred Stocks or Shares
A class of stock that entitles the owners to a stated dollar value per
share in liquidation (paid after bondholders) and a fixed dividend paid
ahead of the company's common shares. Preferred shares usually only have
voting rights when a stated number of dividends have been missed. Preferred
shares are generally considered income investments.
Premium
1. The amount by which a bond or preferred stock may sell above its
par value. In the case of a new issue of bonds or stocks, the premium
is the amount the market price rises over the original selling price.
2. The premium can also refer to the part of the redemption price of a
bond or preferred stock that is in excess of face value, par value or
market price. 3. When referring to options, the premium is the price paid
by the buyer of an option contract to a seller.
| Price-Earnings
Ratio or PE Multiple |
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This is a common stock's current market price divided by annual per
share earnings. This ratio is a short way of saying that a share is selling
at so many times its actual or anticipated annual earnings. A price-earnings
ratio is one tool used to compare one share to another.
Primary Offering or Primary Market
The original sale of any new issue of a company's securities.
Prime Rate
The interest rate chartered banks charge to their most credit-worthy
borrowers.
Principal
A dealer buying or selling securities for his or her own account. The
term "principal" can also refer to a person's capital or to the face value
of a bond.
Prior Preferred
A preferred stock which in the liquidation of the issuing company would
rank ahead of other classes of preferred shares as to asset and dividend
entitlement.
Private Placements
The underwriting of a security and its sale to a few buyers, usually
institutional, in large amounts. No formal prospectus is needed to be
prepared in this instance as the buyers are considered to be sophisticated.
Pro Forma
When a new issue is being planned for distribution, the corporation
issuing the security must tell the suppliers of the new capital how they
intend on spending the money received from the sale of the securities.
The corporation publishes a pro forma balance sheet which integrates the
new pool of money into their current operation. This shows the shareholders
how the corporation would have spent the money if they had it on the day
the pro forma balance sheet was created.
Pro Rata
This means "in proportion to." For example, a dividend is a pro rata
payment because the amount of dividend each shareholder receives is in
proportion to the number of shares he or she owns.
Profit Taking
Selling securities to take a profit. The process of converting paper
profits into cash.
A sophisticated computerized trading strategy whereby a portfolio manager
attempts to earn a profit from the price spreads between a portfolio of
equities similar or identical to those underlying a designated stock index,
e.g. the Standard & Poor's 500 Index, and the price at which futures contracts
(or their options) on the index trade in financial futures markets.
Prospectus
A legal document which describes the securities being offered for sale
to the public. These documents usually disclose pertinent information
concerning the company's operations, securities, management and purpose
of the offering. The prospectus must be prepared in accordance with requirements
of the applicable provincial securities commissions.
Proxy
Written authorization given by a shareholder to someone else, who does
not necessarily need to be a shareholder, to represent him or her and
vote at a shareholders' meeting.
Prudent Portfolio Rule
In some provinces the law requires that a trustee may only invest in
a security if it is one which an ordinary prudent person would buy if
he or she were investing for the benefit of other people for whom he or
she felt morally bound to provide. Some provinces apply both this rule
and the rule under legal investment, where a list of specific securities
has been designated.
Purchase Fund
A fund set up by a company to retire, through purchases in the market,
a specified amount of its outstanding preferred shares or debt. Purchases
are made at or below a stipulated price.
Push-out
During a stock split, a push-out occurs when new shares are forwarded
directly to the registered holders of old share certificates, without
the holders having to surrender these old shares. Both old and new shares
have equal value.
Put Options
An option which gives the holder the right, but not the obligation,
to sell a fixed amount of a certain stock at a specified price within
a specified time. Puts are purchased by those who think a stock may go
down in price.
