Issue of shares

Published on October 31, 2023   10 min
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My name is Rudy Aernoudt. I'm a professor at the University of Ghent in Belgium. Today, the talk is about issue of shares of stock markets.
When we speak about stock markets, we are speaking about the quotation of shares, which is well known. Secondly, of bonds, which might be government bonds, industry bonds, that's what we call them, the secondary market, but other things like options, futures, turbo, trackers, are all financial products that can be quoted on the stock exchange. If you speak about stock exchange, the stock exchange can be used as a financing instrument. If once you're quoted on the stocks and need money, you can raise capital by having more shares or it can be used, of course, as an investment vehicle for those who are buying shares.
In fact, we should not speak about stock exchange but stock exchanges because everywhere in the world we have different stocks. For instances in Europe, we have Euronext and Euronext is a merger of the former National Stock Exchanges of Amsterdam, Brussels, Paris, Dublin, Lisbon, Oslo, Milan. We have the Deutsche Borse, which is in fact Frankfurt and Switzerland. We have of course, the London Stock Exchange, which in particular is the alternative market for young start ups and technology companies and in the United States, of course, we have the New York Stock Exchange and we have the NASDAQ. All of them are different stock exchanges with different rules.
What is important if you speak about stock exchanges is two elements. The first element is what we call liquidity. How much rotation is there for a certain stock? For instance, for a certain share, how many people are buying, how many people are selling? Now, the big problem, if you quote a share on the stock and there's not enough liquidity, there's not enough people buying or selling, then one buyer or one seller can really influence dramatically the price of the share. One of the conditions today quoted is to have sufficient liquidity. The second big concept we should know is what we call capitalization. Capitalization is the value of the company based on the price of the shares. You take the price of the share, you multiply by the number of the shared, and that's the capitalization value of a company that is quoted on the stock. This capitalization, we speak about large caps, mid caps and small caps, depending on how big this capitalization is.