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Type of Securities Investment Strategies Fundamental Analysis Technical Analysis
Understanding Financial Statements Income Statement Analysis Balance Sheet Analysis Cash Flow Analysis Shareholders' Equity Analysis Ratios and Definitions

Shareholders’ Equity Analysis

 - Are the stockholders really

 - Do you know where your
    equity dollars are?

 - How comprehensive income
    can affect stock values

 - Watch out for your Dividends
 - Stock splits, dividends
    and reverse splits

 - Spin-offs, tracking stocks
    and determining new cost

 - Stock rights give board of
    directors more power then
    they are entitled to

 - Stock rights gove board of
     directors more power than they
     are entitled to



Stock rights give board of directors more power
then they are entitled to

Stock rights are options given to shareholders to purchase additional shares, usually at a discounted price, and with a ten-year expiration date. Normally the distribution is 15% or less of the total shares outstanding and is granted only if certain predetermined conditions are met.

Stockholder rights plans are usually designed by the board of directors of a company to prevent hostile takeover attempts. They make it more expensive for an acquirer to take over a company without the target’s board of directors’ approval. 

When the plan is first approved, the rights are attached to the common stock. They are not exercisable, however, nor can they be traded separately, unless certain conditions are met. These conditions normally require an outside party to acquire about 15% of the ownership of the company before the rights become activated. The board of directors may also retain the right to cancel or change the plan at any time, even after the conditions are met. 

Stock rights are really a hindrance to the shareholders, giving the board of directors of a company more power and control over takeovers than they are entitled to. This makes it harder for an acquiring company to solicit the stockholders directly, and to bypass the board of directors.

There are also companies that distribute stock rights to shareholders, which are separately traded on the exchanges. Normally, stock rights are non-taxable until the rights or the stocks are sold. Contact the company and the IRS for specific tax instructions.




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