Ask
The lowest price at which someone is willing to sell a security.

Best Efforts Sale
A method of securities distribution/underwriting in which the securities firm agrees to sell as much of the offering as possible and return any unsold shares to the issuer. As opposed to a guaranteed or fixed price sale, where the underwriter agrees to sell a specific number of shares (with the securities firm holding any unsold shares in its own account if necessary).

Bid
The highest price at which someone is willing to buy a security.

Buy
Purchase of a security.

Capital Gain
Occurs when an investor sells an investment at a price higher than his cost basis in the investment.

Common Stock
Securities that represent an ownership interest in a corporation.

Day Order
An order condition that causes your order to be canceled at the end of the current day's trading if your order is not executed.

Dilution
Effect on earnings per share and book value per share if all convertible securities were converted or all warrants or stock options were exercised.

Direct Public Offerings
Offering of new securities to the public directly by an issuer without the assistance of an investment banking firm.

Dividend
A distribution by an issuer to holders of the issuer's stock.

Dow Jones Industrial Average (Dow)
Best known stock index in the U.S. It contains 30 New York Stock Exchange stocks and is considered a barometer of how shares of the largest U.S. companies are performing.

Earnings Per Share (EPS)
A fraction representing the issuer's earnings per each share outstanding.

Exchange
The marketplace in which shares, options and futures on stocks, bonds, commodities and indices are traded.

Firm Commitment Underwriting
A type of underwriting whereby the underwriter agrees to purchase the entire issue from the issuer, regardless of his ability to sell the securities to the public. Any unsold shares cannot be returned to the issuer.

Form 10-K
A comprehensive overview of the state of a company's business and financial health which must be filed with the SEC within 90 days of the company's fiscal year-end.

Form 10-Q
A comprehensive overview of the state of a company's business and financial health which must be filed with the SEC on a quarterly basis.

Form 8-K
The report that a publicly-held company must file reporting on defined "material" events that might affects its financial situation or the value of its assets or shares.

Form Filed
The Securities and Exchange Commission (SEC) requires issuers to file information regarding their corporate status and developments on various forms, depending on the type of event or information that is being reported. Typically, a U.S. issuer conducting an IPO will file on Form S-1. Alternatively, a foreign issuer files for its IPO on Form F-1.

Form-S1
A registration statement that is filed with the SEC prior to an initial public offering of securities.

Going Public
Industry term used to describe the initial sale of shares of a privately held corporation to the public. To fund corporate expansion, a company may go public to raise capital. See Initial Public Offering.

Initial Public Offering (IPO)
The first public distribution of stock from a company that has not been publicly traded before.

Issuer
An entity, such as a corporation, municipality or government, that has the power to issue and distribute securities.

Lock-up Period
The lead underwriter typically restricts insiders from selling their shares for a period of time - usually 180 days -- from the effective date of the offering. However, the lead underwriter has the option of lifting the lock-up period earlier.

Managing Underwriter
The leading underwriter of the underwriting group. The managing underwriter is empowered to act as agent for the underwriting group, and is also known as the Syndicate Manager.

Market Capitalization
The dollar value placed on a company by the market, calculated by multiplying the total number of shares outstanding by the current share price.

Market Order
An order, which instructs a broker to execute an order as quickly as possible at the best price available. During market hours, this means orders for widely traded securities will usually execute at or close to the current quotation. Buy orders will execute at or close to the "ask" price and sell orders will execute at or close to the "bid" price.

NASD
The National Association of Securities Dealers is a self-regulating organization, like the New York Stock Exchange, that is responsible for regulating its members. Most broker-dealers are members. The NASD operates the NASDAQ stock market.

NASDAQ
National Association of Securities Dealer Automated Quotations system, designed to facilitate over-the-counter stock trading.

Net Worth
The value of your personal assets (including your home, contents of your home, car(s), investments, retirement plans, and insurance) minus any outstanding obligations (mortgage, outstanding loans and credit card debt).

New Issue
A security being offered to the public for the first time. New issues may be initial public offerings by private companies going public or additional securities of corporations already public.

NYSE
The oldest and largest stock exchange (founded in 1792) in the U.S. Located in New York City, it is where more than 3,000 (common and preferred) stocks are traded. Also known as the Big Board or The Exchange.

Open
The price at which a security opened for trading on a given day.

Option
A contract that permits the owner (depending on the type of option held) to purchase or sell a security at a specific ("strike") price until a specified expiration date. An option to purchase a security is a "call." An option to sell a security is a "put." See Call Option and Put Option.

Preferred Stock
A preferred stock is a type of capital stock that pays dividends at a set rate. Generally, dividend payments to preferred holders must be made before common stock dividends can be paid. Preferred stocks usually do not have voting rights.

Preliminary Prospectus
The first document released by the underwriter of a new issue to prospective purchasers during the cooling-off period. The preliminary prospectus includes information about the offering and about the company, but does not contain all the information that will be included in the final prospectus. The preliminary prospectus is also known as the "red herring."

Price Earnings Ratio
Price of a stock divided by earnings per share.

Principal
The amount of money that is financed, borrowed, or invested.

Private Placement
A type of offering exempt from registration that allows the issuing company to avoid registration requirements and save underwriting fees by offering company shares directly to institutional and accredited investors.

Prospectus
A printed document that summarizes a corporation's registration statement for a new issue of non-exempt securities that was filed with the SEC. It details material information about the corporation and the security being issued. A prospectus must be given to all buyers and potential buyers of the new issue.

Proxy
A written authorization by a shareholder allowing a representative to vote for or against business proposals and directors at annual meetings.

Public Offering
An offering of new securities to the public at an offering price that has been agreed upon by the issuer and the lead underwriter. This can only be done after the issue has been registered with the SEC. The term is also used when referring to a secondary distribution of securities previously issued.

Public Offering Price
The price at which underwriters offer a new issue to the public.

Quiet Period
The period during which an issuer is prohibited from engaging in promotional publicity for the issue. This interval begins during the pre-filing period and lasts for either 40 or 90 days after the effective date.

Registration Statement
A document that must be filed with the SEC before securities can be sold to the public. It describes the business of the issuer of the securities, how the proceeds of the offering will be used and includes some background on the principal executives, audited financial statements, and other pertinent data.

Rights
Rights allow existing shareholders of a corporation to subscribe to shares of a new issue of common stock before that stock is offered to the public. A right usually has a limited life, is transferable, and entitles the holder to buy the new common stock below the Public Offering Price.

Risk/Return Factor
The relationship between an investment's growth potential and its exposure to loss.

Road Show
The process by which underwriters acquaint potential institutional investors with the products, people and finances of a company planning to go public. Generally, this presentation is a face-to-face meeting, but online and video presentations may become commonplace in the future.

SEC
The Securities and Exchange Commission is the federal agency created to administer various acts that constitute the federal securities laws.

Secondary Market
The trading in existing or outstanding shares of securities as opposed to new issues, or initial public offerings. Transactions in the secondary market occur either on an exchange or in the over the counter market.

Securities Act of 1933
An act of Congress, which governs the issuance of new issues of securities. It requires the registration of securities, disclosure of pertinent information relating to new issues so that investors may make informed decisions. The oversight of this function is the responsibility of the Securities and Exchange Commission (SEC).

Sell
To sell a security you own.

Sell Short
Selling a stock not owned in the hope that the price will go down. The seller must indicate that the sale is a short sale when the order is entered. If available, the stock may be borrowed from a brokerage firm for delivery to the buyer and must be bought back at a future date.

Selling Group
A group of broker dealers hired by the underwriters to act as their agent in order to sell a new issue. The selling group members must abide by the selected dealer agreement, which outlines the terms of the relationship with the underwriting group.

SIC Code
Abbreviation for Standard Industrial Classification. Each 4-digit code represents a unique business activity.

Split
When a company increases the number of shares it has outstanding. In a two-for-one split, each share is split into two. The investor's percentage of equity in the company remains the same. So, if you had 100 shares valued at $50, each, after the split you would have 200 shares valued at $25 each. Companies often split their stock when the price gets too high. There are also reverse splits, when companies decrease the number of shares outstanding.

Spread
The difference between a new issue's public offering price and the proceeds received by the issuer--commonly know as the "underwriting spread".

Ticker Symbol
Generally a 1- to 4-letter abbreviation for a company name that is the symbol used to identify the company for trading purposes.

Tombstone
An announcement that gives basic information about an offering of securities to investors. It is not an offer to sell or purchase the securities, but rather a notice that follows specific statutory guidelines.

Transfer Agent
An agent employed by a corporation to maintain shareholder records, including purchases, sales, and account balances.

Underwriter
Investment bankers who handle the offering of a new issue of securities. They buy all the securities from the issuer and distribute them to investors. They make a profit on the underwriting spread. The investment banker may be acting alone or as a member of an underwriting group or syndicate.

Underwriting Group
Group of investment bankers formed by the originating investment banker in a new issue of securities. The group operates under an agreement among underwriters. The purpose of the underwriting group is to limit risk and assure successful distribution of the issue.

Venture Capital
An important source of financing used to fund startup and emerging growth companies that usually do not have access to the capital markets. VC typically entails significant investment risk but offers the potential for above-average future returns.

Volume
The daily number of shares traded in a security.

Warrants
A type of security usually issued together with a bond or preferred stock that allows the holder to buy a proportionate amount of common stock at a fixed price for a period of years or to perpetuity. Warrants are sometimes transferable and often trade on the major exchanges.

52-Week High
The highest price at which a security has traded within the previous 52 weeks.