SOME TERMS RELATED TO CAPITAL MARKET

Insider Trading

• It is illegal to buy or sell stocks or other securities based on material, non-public information about a company.
• In simpler terms, it’s when someone trades stocks using secret information that could affect the stock’s price, giving them an unfair advantage over other investors.
• This unfair advantage violates securities laws and undermines the integrity of the financial markets

Circular Trading

• It refers to a deceptive practice where securities are traded among a group of individuals or entities to create the appearance of significant market activity or volume.
• In this scheme, trades are executed without any change in beneficial ownership, meaning that the same securities are bought and sold repeatedly among the participants.
• Circular trading is often conducted to artificially inflate a security’s trading volume or price, misleading investors about its liquidity or value.
• This practice is illegal and violates securities regulations to ensure fair and transparent markets.

Angel Investor

• An angel investor is an affluent individual who provides financial backing to startups or small businesses, typically in exchange for convertible debt.
• Angel investors are often entrepreneurs themselves or retired business professionals who seek to invest their personal wealth in promising ventures with high growth potential.
• In addition to capital, angel investors often contribute their expertise, industry connections, and mentorship to help the startups succeed.

Venture capitalist (VC)

• They are professional investor or investment firms that provide financial capital to startup companies and small businesses with high growth potential in exchange for an ownership stake.
• Venture capitalists typically invest in early-stage or growth-stage companies with innovative ideas, scalable business models, and the potential for significant returns on investment.
• They take on higher risks than traditional investors in exchange for the possibility of substantial rewards if the companies they invest in become successful.

Bull Market:

• A bull market refers to a period of rising prices and optimism in the financial markets. It is characterized by investor confidence, increasing stock prices, and expectations of continued growth.

Bear Market:

• A bear market, on the other hand, denotes a period of declining prices and pessimism in the financial markets. It is characterized by falling stock prices, subdued investor sentiment, and expectations of an economic downturn.

Private Placement

• Private placement refers to the process of raising capital by selling securities directly to a select group of investors rather than through a public offering.
• In a private placement, the issuing company offers securities, such as stocks or bonds, to a limited number of investors, including institutional investors, accredited investors, or high-net-worth individuals.

Merchant Banker

• A merchant banker is a financial institution that provides various financial services related to investment banking activities.
• These services include assisting companies in raising capital (IPO), advising on mergers and acquisitions, underwriting securities offerings, and offering advisory services for corporate restructuring and strategic planning.

Underwriting:

• It is a financial service provided by investment banks or financial institutions to companies issuing securities, such as stocks or bonds, to the public.
• The underwriter assesses the risk associated with the issuance and guarantees the sale of these securities to investors at a predetermined price.
• Underwriting involves evaluating the issuing company’s financial health, determining the optimal offering price, purchasing the securities from the issuer, and reselling them to investors.
• The underwriter receives compensation for assuming the risk associated with the offering.