Exercise 6. Complete the following sentences as in the texts of Section A.

1. Common stock is a security … .

2. The preferred stock represents ownership in the company, but .

3. Blue chip stocks are common stocks of high quality offered by … .

4. The stock market reflects changes in the economy, it is sensitive to … .

5. In NASDAQ there is no … .

6. NASDAQ is the stock market for … .

7. A stock market index is a measurement … .

8. … is an index of “blue chip” stocks of US industrial companies.

Exercise 7.Consider the following statements whether they are True or False. Give reasons.

1. Shares can be bought as an investment.

2. New and previously issued shares are traded on the primary markets.

3. The division of stock markets into bull and bear markets depends on the territory they cover.

4. NYSE is the oldest stock exchange in the world.

5. Stock exchanges provide the place for trading but they do not buy and sell stocks themselves.

6. “Weighted” index means that it takes market capitalization into account.

7. The footsie is a share index of 100 largest companies that represent half of the UK share market.

8. Foreigners have long had the possibility to buy the shares of Saudi Arabian companies on the stock market.

9. The restrictions to foreign investment in the stock exchange in Saudi Arabia are similar to those in China.

Exercise 8. Complete the article using the words from the box. There is one extra you do not need.

stockbroker (2), financial institution, shares, profit, fee, online, trading, broking service, buy, client, pay, sell

Stocks and shares

If you are thinking of trading in stocks and shares then you need to know a little more about how the market works. In basic terms (1)______ here involves buying (2)______ in a company and then hanging on to them until you can (3)______ them at an acceptable (4)______. This may mean buying and selling in hours or in years.

In order to trade in stocks and shares you will need the services of a (5)______ who will buy and sell the shares on your behalf. There will be a (6)______ payable for this service – in most cases you will (7)______whenever you make a trade. There are various ways you can do this, including:

· Working with a specific (8)_______ who acts on your instructions either over the phone or (9)______. The broker here will be able to give you specific advice when you need it.

· Joining an online (10)______ that allows you to manage your buying a d selling yourself via a computer and which then carries out your instructions as you make them. Some brokerage sites will expect you to do your own research on what to (11)______ and when to sell whilst others will also offer informational services on a general basis.

· Using a shares service run by another (12)______ such as your high street bank. These services work in much the same way as online brokers.

Over to you

Write an essay on the theme “What shares would I buy if I were an investor”.

UNIT IX

MERGERS and ACQUISITIONS

Warm up

Why do companies merge? How do mergers

and acquisitions affect the economy of the

country and the world economy?

Section A

Reading 1

NASDAQ Bids

In December 2005, the London Stock Exchange (LSE) rejected a £1.6 billion takeover offer from Macqiarie Bank. The LSE described the offer as “derisory”. Shortly after Macquarie withdrew its offer, the LSE received an unsolicited approach from NASDAQ valuing the company at £2.4 billion. This too is rejected. And less than two weeks later struck a deal with LSE’s largest shareholder, Ameriprise Financial’s Threadneedle Asset Management unit, to acquire all of that firm’s stake, consisting of 35.4 million shares, at £11.75 per share. NASDAQ also purchased 2.69 million additional shares, resulting in a total stake of 15%. The move was seen as an effort to force LSE to the negotiating table, as well as to limit the Exchange’s strategic flexibility.

United Kingdom financial rules required that NASDAQ wait for a period of time before renewing its effort. In November 2006, within a month or two of the expiration of this period, NASDAQ increased its stake to 28.75% and launched a hostile offer at the minimum permitted bid of £12.43 per share, which was the highest NASDAQ had paid on the open market for its existing shares. The LSE immediately rejected this bid, stating that it “substantially undervalues” the company.

NASDAQ revised its offer (characterized as an ‘unsolicited’ bid, rather than a “hostile takeover attempt”) in December 2006, indicating that it would be able to complete the deal with 50% (plus one share) of LSE’s stock, rather than the 90% it had been seeking. The U.S. exchange did not, however, raise its bid. Many hedge funds had accumulated large positions within the LSE, and many managers of those funds, as well as Furs, indicated that the bid was still not satisfactory.

In the end, NASDAQ’s offer was roundly rejected by LSE shareholders. NASDAQ’s offer duly lapsed. Responding to the news, Chris Gibson-Smith, the LSE’s chairman, said: ”The Exchange’s strategy has produced outstanding results for shareholders by facilitating a structural shift in volume growth in an increasingly international market at the centre of the world’s equity flows. The Exchange intends to build on its exceptionally valuable brand by progressing various competitive, collaborative and strategic opportunities, thereby reinforcing its uniquely powerful position in a vast evolving global sector”.

In August 2007, NASDAQ announced that it was abandoning its plan to take over the LSE and subsequently look for options to divest its 31% (61.3 million shares) shareholding in the company in light of its failed takeover attempt. In September 2007, NASDAQ agreed to sell the majority of its shares to Borse Dubai , leaving the United Arab Emirates-based exchange with 28% of the LSE.