What is one common thing among the founders of famous companies like Google, Ford and Facebook that allows them to have complete control over the decision-making of their companies? The answer to this question is dual-class shares.
I know you are very confused about what dual-class shares are and what advantages and disadvantages they offer to the founders. Don’t worry I will explain to you about dual-class voting shares in great detail without technical jargon. We will also talk about companies with dual-class stock structures.
In dual-class shares, the founders own a small portion of the company’s total stock but they have the maximum voting power. For example, a company may issue class A and class B shares. Both these shares may have different voting power and dividend payments.
In this scenario, class A shares which have limited or no voting rights are offered to the general public while class B shares which have the maximum voting power are offered to the founders, executives, and family.
Why Dual-Class Voting Shares are Used?
Founders who want to enter the public equity markets for financing but want to gain full control over their company opt for dual-class stocks. Using this strategy founders can focus on their long-term vision. They don’t have to worry about their investors who just want profits.
Famous Examples of Companies That Use Dual Class Structure
Google
Alphabet subsidiary Google issued two classes of shares in 2004. Here, class A was offered to the general public which carried one vote per share. Although Class B which was offered to the founders carried 10 votes. Later, the company issued class C shares that had zero voting rights.
Ford
The Ford family has also issued two classes of shares: Class A and Class B. The family owns the class B shares which gives them 40% of voting power with just 5.0% of the total equity in the company.
Facebook
Facebook also follows a dual-class common stock structure. Mark Zuckerberg and his close executives possess class B shares which carry 10 votes. Zuckerberg owns 75% of class B shares which allows him to control 58% of Facebook’s votes.
Advantages of Dual Class Shares
The biggest advantage of dual-class voting shares is that the founders have complete control over the decision-making and functioning of the company.
The company can still get public financing without worrying about giving too much voting power to its investors.
Founders can focus on long-term growth. It protects the company from investors who only want to gain profits.
Disadvantages of Dual Class Shares
Dual-class voting shares give unfair voting rights to their investors.
Super voting rights in the hands of the founders and executives weaken the structure of the company.
The structure of the company cannot be easily transformed into a single class.
A study from the National Bureau of Economic Research provided strong evidence that the company which follow a dual-class structure face more debt than single-class shares.
Shareholders can make bad decisions with few consequences.
Conclusion
As you can see dual-class voting shares allow the founders and insiders of the company to have complete control over the company with limited shares.
Almost every other founder wants to focus on the company’s long-term goals and doesn’t want to allow investors to control the decision-making of the company. That’s why well-known founders are implementing a dual-class structure in their respective companies.
Although dual-class voting shares do have their own cons. The founders and investors should understand the benefits and consequences of dual-class voting shares.
FAQs
What is a dual-class share?
In a dual-class stock structure, a company issues two classes of shares: Class A and Class B where one of the shares have more voting rights than the other one. For example, class A shares which are offered to the general public have one vote per share. While class B shares which are offered to the founders and insiders of the company can have 10 voting rights.
What are the benefits of Dual-class shares?
Since the founders have higher voting rights with a limited amount of stock they can have complete control over the decision-making of the company. They can focus on long-term goals. This protects the company investors who only aim to make profits.
Is it unfair or unethical for corporations to create classes of stock with unequal voting rights?
No, it is not unfair to issue stock with unequal voting right since the company before issuing its shares tells the general public and investors that they will be following the dual-class structure. Investors know all the terms and conditions and are under no obligation to buy the shares.
Everything is business. Well, it is true, just look around you and you will see multiple examples of a corporation selling something. We are all covered with businesses and it is efficient.
Having businesses is efficient because it provides us with things that we want. In other words, they provide us with something of value. Otherwise, we would have to make everything on our own which would be inefficient and time-consuming and practically impossible. So businesses make markets efficient and society a better-managed entity.
When a business turns big, I mean really big, then it needs to scale accordingly. Scaling in India is a very hard process because of different types of people everywhere. Most companies are primarily limited in nature and at their inception. This means that they operate mostly on private capital but at some point in time they need more funds than their private capacity. Thus, when a company successfully pulls off the magic of scaling then happens the true magic. It goes on and lists itself as a public limited company that now can make money from people to scale and fuel other activities.
Not to mention, the listing process may seem easy and simple, the fact is that it isn’t. This is an article about how a company lists itself in India. There are majorly two important exchanges in India, namely NSE and BSE. Read on to find out how a company is listed on NSE and BSE.
Every company which operates in a market of high demand has a good scope of growing and scaling. From the inception of a company, most companies are privately limited. Private limited means that these companies are funded privately, or the source of the capital is just normal private people or organisations behind the promoting chair. Hence, they operate on a limited capital that they can privately afford to fuel the operations at that company.
Some companies, however, go ahead and become big national companies that need huge cash flows to fund their activities. At the point when companies become big and quite popular in a nation, the promoters or the chair people will be needing more capital.
There can be many sources of funds to be considered, as a loan, or issuing debentures or selling stakes etcetera. One of the most famous ways to raise capital is to list the company on a stock exchange.
In corporate finance, a listing refers to the company’s shares being on the list of stocks that are officially traded on a stock exchange. Thus, listing means that anyone from the public or a retail investor can now take part in a company by buying its shares. The general public will be buying a company’s shares to earn capital appreciation or dividends.
Why do Companies Go Public?
A very valid question that may arise in your head is, why do companies go public? There can be many reasons why a company chooses to go public. It depends on the entrepreneur running it on how he/she is willing to go about raising funds. The most common and eligible reasons for a company to go public and the list itself is given here –
Fund Capex from internal accruals
Raise a Series of funding from another PE (Private Equity) fund
Raise debt from bankers
Float a bond (this is another form of raising debt)
File for an Initial Public Offer (IPO) by allotting shares from authorised capital
A combination of all the above
Let us go into some detail about how these reasons arose in the first place.
Capex requirements
Let us first understand the term Capex first. Capex is made up of two individual words, that are capital (Cap) and expenditure (ex). Capital expenditure is that form of expenditure that is required to fund the management and acquiring of fixed assets. Fixed assets are those assets that are fixed in nature that will pay benefits after a year or so. Thus, capital expenditure is spending money on fixed assets that are not to be converted into cash quickly.
They include land, building and machinery. So we can conclude, Capex expenditure is the expenditure that a company incurs for growth in business. This long term growth expenditure has to be fuelled from somewhere, that is why companies go public.
Provide an exit for the company’s early investors
After the process of listing is done, the shares of the listed company go around in the market and are traded freely. When this situation arises, any existing shareholder can exit the company by selling his/her shares. That existing shareholder could be one of the promoter, anger investor Private equity funds or venture capitalists.
They can use this opportunity to sell their shares in the stock market. Thus, by selling the shares or stake that they own, they can exit the venture and thus exit the initial investment they made in the company. However, they can also choose to sell shares in multiple parts and slots. There have been many successful and famous exits in India like that of Kunal Shah from Freecharge.
Just ~4 years ago $~450M of @FreeCharge was largest internet exit.
When a company chooses to go public, it avoids taking any sort of loan. The reason is that taking loans is hefty work, it also comes with much financial burden and high-interest rates.
So many entrepreneurs refer to selling stakes or ownerships in the form of shares. The best way to do that is to be listed. The listing makes a company’s shares trade freely in the market and makes space for funds that the company needs to grow. That too happens without paying any form of interest and any other sort of financial charges.
Reward employees
There is a thing called “Employee stock option plan” or ESOPs. They are awarded to employees who are early in the venture and/or are outstanding with their work. They work as an incentive for employees who work really hard to make a successful venture.
Once the company is listed and shares start trading freely, it makes space for more ESOPs. They are awarded to employees to keep the work motivation high and construct a better work environment. A few examples where the employee benefited from ESOP would be Google, Infosys, Twitter, Facebook etc.
Improves clarity
As a company goes public and gets out of its private cocoon, it raises its status. Being a listed entity in a stock exchange is definitely not a small thing, it makes the company stand in the limelight of investors. Which interests people more in getting to know about that company. This will eventually create a positive impact on the company in its future prospects.
What is a Stock Exchange?
When we discuss ‘listing’ and all the technicalities of listing, it is extremely crucial to talk about stock exchanges. Whether you are a person trying to list your company or a person willing to invest his/her money with the company, one entity that you both have to work together with is the stock exchange. So, what is a stock exchange?
Let us take one example to know clearly what a stock exchange is. Imagine the Kirana store near your house, or a supermarket or a shop of essentials that has a lot of items in its store. Just like a Kirana store is a store for items, a stock exchange is a marketplace for equities. It is a place where buyers and sellers come together to complete trade and settle transactions.
The stock market is where everyone who wants to transact in shares goes. Transact in simple terms means buying and selling. It is impossible for a stock to be traded without being listed on the stock exchange. Thus, the main purpose of a stock market is to facilitate equities trading.
Trading is buying and selling of securities. In India, there are two main stock exchanges. The names of these stock exchanges are National stock exchanges and Bombay stock exchange. Let us read a little about them.
National Stock exchange
NSE was incorporated in 1992. It was recognised as a stock exchange by SEBI in April 1993 and commenced operations in 1994 with the launch of the wholesale debt market, followed shortly after by the launch of the cash market segment. IT is the leading stock exchange in India. Located in Mumbai, Maharashtra and is owned by some leading financial institutions, banks, and insurance companies
Bombay stock exchange
BSE was established in 1875. It was Asia’s first and the fastest stock exchange in the world. It is called the fastest stock exchange as it operates at a speed of 6 microseconds. It was established over 143 years ago, and BSE has helped the country to grow its capital market by ensuring a smooth flow of equities. Though it is now known as the Bombay stock exchange, it was established as “The Native Share and stockbrokers association” in the inception year of 1875. In 2017 BSE became the first listed stock exchange of India.
The Process of Listing (Initial Public Offering)
Now we will discuss the cherry of the cake, the process of listing. It is also known by the name of initial public offering because it is the first time (Initial) when the shares will be offered to the public. This is a very strict process and both the National and the Bombay stock exchange take it very heartedly. It goes without saying at this point that the company which is trying to list itself has to follow dedicated guidelines of the desired exchange. However, the most common checkpoints to be ticked are listed here –
Appointing a merchant banker
Merchant bankers are also called Book Running Lead Managers (BRLM)/Lead Managers (LM). The work of a merchant banker has diverse actions. It includes conducting some efforts to check all the legal compliances at the company filing for the IPO and issuing a due diligence certificate.
The Lead Manager has to work closely with the company to prepare the DRHP. DRHP stands for draft red herring prospectus. He also has to underwrite shares, which is agreeing to buy all the unsold shares. He then has to help the company to reach a decision on a reasonable price band of the offering. Thus, these are all the major functions that a merchant banker does.
For example, The merchant banks (book running lead managers) for the issue are Morgan Stanley India, Goldman Sachs (India), ICICI Securities, Axis Capital, JP Morgan, Citigroup Global Markets India and HDFC Bank.
Applying to SEBI with a registration document
Not to mention that everything at a listing is done through the rules of the securities exchange board of India. After getting the work done by a merchant banker, you have to pitch a registration document to SEBI. That document should contain what the company does and what is the motive of the listing along with all other mandated information. After all the process, the company should look for an affirmative response from the regulating body to go ahead and issue a DRHP.
DRHP
DRHP of Zomato
DRHP stands for Draft red herring prospectus. It is a disclosure document that describes information about the IPO to the general public. It contains a lot of information about the company and the issue price and that is often too deep in finance terminologies. The most important and imperative information that is present in a DRHP is as follows –
Estimated IPO size
Everything about the shares that are to be issued
The risk involved in the business
Why the company wants to go public and how does it plan to utilise the funds
Revenue model and all sorts of expenditure
Complete financial statements
Management relevant information
Marketing the IPO
After DRHP is issued and is made public, it is important to float some marketing about the IPO. The company would want to reach the maximum audience of investors for the purpose of its public offering. So they take support of print media and other sorts of media to market the IPO more.
Fixing the price band
Fixing the price band is super imperative when preparing for an IPO. The price is the only number which the people would see first. So, it is important to set the number not too high and not too low to attract the right amount of people on the board of directors. This is helmed by the existing shareholders and is helped by experts like merchant bankers. Once the price band is fixed, that becomes the base on which the company is listed on the stock exchange.
Book building
Book building is the process of capturing and recording investor demand for shares. For example, if the price band is between Rs.100 and Rs.150 then the public can choose. They can choose what is the right amount per share that the company deserves. The process of book building is to collect these price points along with respective qualities of shares and demand. Book building is perceived as an effective price discovery method.
Closing date
After the book building process is done and completed, it is said as the closing date. Generally, it is open for two to three days and maybe more in some exceptions. Thus, then the price point is selected which has the most bids from investors. That price becomes the listing share price of the company.
Listing day
Paytm Listing Day
Then comes the day when the company actually gets listed on the stock exchange. That becomes the day when the shares start to be traded freely in the market.
When the shares are being bid, they lay a foundation for future selling values. This happens when investors choose the desired price from the given price band. This whole arrangement around the date of issue is known as the “Primary Markets”. After the initial bidding has stopped and the stock gets listed on the stock exchange, the share starts to trade normally like any other listed company. This situation in this share is known as the “Secondary Markets”.
Once the stock transitions from primary markets to secondary markets, it gets traded daily on the stock exchange. People start buying and selling the stocks regularly and normally like any other company.
Prerequisites for Listing on National Stock Exchange
There are many checkpoints that one has to fulfil before getting listed. Some of the most needed and crucial prerequisites are –
The paid-up equity capital of the applicant shall not be less than 10 crores and the capitalization of the applicant’s equity shall not be less than 25 crores.
The Issuer shall have adhered to conditions precedent to listing as emerging from inter-alia from Securities Contracts (Regulations) Act 1956, Companies Act 1956/2013, Securities and Exchange Board of India Act 1992, any rules and/or regulations framed under foregoing statutes, as also any circular, clarifications, guidelines issued by the appropriate authority under foregoing statutes.
Prerequisites for Listing on Bombay Stock Exchange
There are many checkpoints that one has to fulfil before getting listed. Some of the most needed and crucial prerequisites at the Bombay stock exchange are –
The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as “the Company”) shall be Rs. 10 crores for IPOs & Rs.3 crore for FPOs.
The minimum issue size shall be Rs. 10 crores.
The minimum market capitalisation of the Company shall be Rs. 25 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price).
Conclusion
In this article, we got to know why a company goes public, the needs that make a company think about listing itself. We read about the stock exchanges in India. The two most important exchanges are the NSE and BSE, the national stock exchange and the Bombay stock exchange. They lay the foundation of stock markets in India. Then we read about the process of how a company is listed in a stock exchange.
After all these discussions, we can say that companies get listed, mainly to fund their Capex (Capital expenditure) requirements. This helps a company grow and get out in the market of more people. If you want to invest in a fresh new IPO then you must read the DRHP that is the draft red herring prospectus. It is super important for an investor to know where he is investing. In this modern world, one thing to make sure of is that your money should grow faster than inflation.
FAQ
What happens when a company gets listed?
When a company gets listed it can raise additional funds by issuing its shares on the stock market.
Can a private company be listed?
No, a private company cannot go public. It will first have to convert itself to a Public Limited company, then only it can be listed on the stock exchange for trading its share.
How long does it take to IPO?
The IPO process depends on many factors but it typically takes six to nine months for the company to complete its public debut.
With the growing and evolving economy, stock picking becomes an essential step to achieve a positive return. In stock picking, certain criteria are fixed and determined to select the capitals for an affirmative response. It’s very important to gather the knowledge that is required in order to make the right investment decisions. That’s why analysing a huge fraction of information is absolutely necessary.
However, it often confuses us that how should we choose the right stock among the bundle of thousands of stocks? Going through every balance sheet and further details could be hectic and time taking.
Therefore, before you move further with your investment, you need to make sure of a checklist for the stock-picking that would make your choice precise. In this article, we present you with the points on the checklist for stock-picking. Stay tuned!
Make Your Choice Clear On Which Company’s Product You Want
Your investment needs precise information and proficiency. You need to make your choice clear on which company’s products you like the most and would prefer. As a consumer for this section, you will know which company’s products you prefer before any other. For better understanding, you can talk to a professional or your friends. List out the advantages that come with the company’s products.
Keep Up Your Strengths
In the market, it’s very essential to keep up your strength and build a strong leader. Marketers often prefer and support people with strong upholding and leadership. This is important because when you choose a corporation for investing, it needs to have a strong upholding in the market otherwise, it becomes very difficult to sustain it over time.
Gather Your Knowledge On How Does The Company Make Money
Many companies (mostly on the Internet) make their shares accessible for consumers by a wide public investment methodology. And when you move forward with it, they make their money in hand.
When a company has a broad range of visitors, it becomes convenient for them to monetize their business strategies and make money through those visitors. But, you need to gather accurate knowledge before going public, this could be a big win for you or a major loss. That’s why it’s very essential to know how the company you choose makes the money and how it monetizes its strategy together with time.
Focus On The Increase In Sales And Revenues
For the investors, profit comes from the increased stock price and high sales and interest. Therefore, the key to increasing the profits is increasing the sales. This makes sure that the consumers are preferring this company’s products and like them as well.
Also, the company needs to have the proper track record for increasing sales and profits. It becomes convenient to go through the sales and profits by hitting the Financial tab on an improved investment webpage.
Avoid Companies With Heavy Indebt
Sometimes when a company is defining its way to success, they often search for the best equipment and assets for the growth of their company. But, instead of purchasing them with the money that came from the stock-picking by the investors, they borrow money for this purpose as in debt.
And later when they get to pay back, a huge interest is added to the debt. Then the amount of profit that comes each year goes for the payment of interest. This led to the company at its initial position and no development occurred.
Therefore, it’s better to choose a company that does not have any in debt interests pending.
Many corporations with time develop the strategic advantage for sustaining by proceeding to operate. This happens when a company has established its name and trust in the market and among the consumers; then even with a slight shortcoming in the product does not take away the trust of people. And they continue with the company’s product lines.
Sustainable advantage can also be obtained within a form of a patent on its various new products that carry the concept of previous products, like complex software. This often happens when a company offers good consumer benefits.
Prefer Companies With An Elevated Barrier To Entry
Certain industries in the market require a huge amount of resources and establishment to make their place in the market. These companies are like those who do not have any such competition among the industries and have a smooth run. There is very little competition for these industries.
This is because the product and services such companies provide needs a long time of dedication and billions of research and resources. Therefore, this becomes a barrier of entry for others. And it is always good to invest in such companies to gain profitable revenue and accomplishment.
Before you get into stock picking, you need to make sure certain criteria that the company passes through to have a great revenue return. You need to determine what achievements and goals you’d want and stick to them. Make sure you choose an industry that carries your interest and brings out great news and trends to let you explore regularly.
Observe and identify the company that holds a strong position in the market and has a great range of consumers.
Talk to the experts and professionals in the investing field and get the knowledge and information to choose the right company for stock-picking. This would help you in better understanding and analysis for the company.
FAQ
What is a stock pick?
A stock pick is when an analyst or investor uses a systematic form of analysis to conclude whether a particular stock will make a good investment or not.
What is the best stock alert app?
Yahoo Finance, StockTwits, and Bloomberg are top apps for stock alerts.
How do I begin investing in stocks?
Decide how you want to invest in the stock market, Learn the difference between investing in stocks and funds, Set a budget for your stock investment, Focus on the long-term, and Manage your stock portfolio.
ETrade has established itself as one of the finest online brokers for trading options as a pioneer in the online brokerage sector. It was one of the first online brokers in the United States and it became the first online broker to provide commission-free trading on ETFs, stocks, and options trades in October 2019. This makes you wonder, how does ETrade make its money? And what is its business model?
A business model is a crucial component of every startup’s long-term success since it is what unlocks value. In some ways, creating a business model is more than just figuring out how to make money. With that in mind, let’s look at the ETrade e-trading platform’s business model.
ETrade, a financial services business located in New York, was formed in 1982 by William A. Porter and Bernard A. Newcomb. Over the years, the firm has grown to over 30 outlets across the United States, making it one of the industry’s pioneers.
ETrade/E*Trade is an electronic trading platform that allows novice and experienced traders to purchase and sell financial assets such as common stock, preferred stock, futures contracts, mutual funds, options, fixed-income investments, and exchange-traded funds.
Products and services offered by ETrade
Etrade earns money through various products and services, including a day trading platform for retail customers. Let’s take a brief look at the services that the firm provides.
Brokerage: E-zero-commission Trade’s US stock trading platform for ordinary clients is known as a brokerage account. They enable you to buy and sell equities, ETFs, mutual funds, potion, and bonds, among other things. At a low fee, you may also trade futures and options contracts, as well as bonds. Until their kid reaches the age of majority, a parent or guardian can handle a minor brokerage account.
Services for Portfolio Management: The portfolio management service is given to both individual and institutional clients. Portfolios can be handled both automatically and manually. Depending on your circumstances, you may also obtain a personally customised portfolio from a financial counsellor.
Bank account: Individuals, families, and companies may open a bank account with ETrade, which provides higher-interest savings and checking accounts. Free initial checks, online bill pay, and an ATM/debit card are all available. You may also use the free Transfer Money service, pay with your credit card online, and borrow against your investments.
Retirement services: ETrade offers retirement (IRA) accounts for tax savings, minor’s savings that an adult may handle for the benefit of a child until they reach the age of majority, and persons commencing their savings at the age of 59.5 years old.
ETrade has a long history as an online broker, and its platforms are well-known for being straightforward to use. And even though it offers many services, including news, research, and screeners, ETrade is still simple to use.
ETrend features a user-friendly interface that allows you to personalise the platforms according to how you want to connect with them.
ETrade offers three web-based/downloadable platforms and two mobile apps, making it an excellent alternative for passive investors and casual traders. To help optimise the value of deposits earned in its brokerage operation, it also offers banking products through the ETrade Bank, an FDIC-registered federal savings bank.
It joins a growing number of online brokers that have switched to commission-free stock, ETF, and options trading in October 2019.
ETrade Business Model
ETrade employs a strategy that generates revenue from payment for order flow as well as interest income earned on the free float. To generate income on customer funds, ETrade invests them in money market accounts. Margin rates levied on purchasing or shorting stocks on the business’s platform also generate revenue for the company.
ETrade charges no commissions, which begs the question: how does ETrade make money?
Margin
Clients at ETrade pay interest on money borrowed to buy stocks and on money borrowed to short stocks. For many broker-dealers, margin interest is a crucial source of revenue, and ETrade is no different. It has rates that are higher than the national average. Depending on the total amount borrowed overnight, they start at 8.95 per cent and go down.
Flow of Orders
ETrade makes the majority of its money through monetising its order flow. Customers’ buy and sell orders are sent to market makers for execution by ETrade. The company is compensated for the order flow in exchange.
When E-margin Trade’s customers borrow money to short or purchase stocks, ETrade receives interest. A transaction-fee mutual fund costs $19.99 to buy or sell at the business.
This is a standard business procedure; therefore, ETrade isn’t doing anything out of the ordinary here. ETrade sends orders to the groups to adjust for the order flow. This is also a frequent industry practice.
ETrade receives less than a cent per share on average for routing orders. That may not seem like a lot, but when you consider that there are about 300,000 trades each day, with several shares per order, it adds up.
Earnings from interest
ETrade advertises heavily on the need of filling your brokerage, bank, retirement, or PMS accounts with them since the more money you invest with them, the more interest you get. The business of ETrade is based on the interest produced by the float, which is invested by millions of customers. Offering free trading to retail investors is a fantastic way to improve their float because they are the least likely to trade actively.
Service charges
Portfolio management, retirement accounts, and other essential portfolio services are also profitable for ETrade. Fees and service charges are how they make money from these services.
The fees for portfolio management vary from $500 to $250,000, with a 0.30 per cent to 0.75 per cent cost.
ETrade charges $25 for premature withdrawals, excess contribution withdrawals, and re-characterisations in retirement accounts (changing from Roth IRA to Traditional IRA).
And, depending on the debit balance available at the time of the trade, margin trading costs range from 5.45 per cent to 8.95 per cent.
In the year 2019, ETrade generated $588 million in fees and service charges.
Commissions on mutual funds
ETrade charges $19.99 to buy or sell a transaction-fee mutual fund. It costs $49.99 to sell a no-load, no-transaction-fee fund fewer than 90 days after acquisition.
ETrade also profits from mutual fund trades through 12b-1 fees, sub-accounting fees, shareholder service costs, and marketing support payments.
Trading Commissions
Only ten to twenty per cent of the millions of traders are active. Active traders, on the other hand, trade often and in large amounts. And many of them trade futures and options, the most lucrative part of the stock market.
This 20% of active traders generate twenty times the money that they lose by providing free trading.
Fees for Futures, Options, and Bonds on ETrade
The larger the number of active traders operating in any of these categories, the higher the commissions because ETrade works with huge volumes rather than premium pricing.
This information makes you wonder if ETrade is losing money on these products. ETrade loses money on its free service. However, because over 80% of traders aren’t active in the markets, they don’t lose much money. ETrade lost $23 million in securities trading fees in 2019. The $23 million loss is well worth it for their business model, given the $421 million in trading commissions they receive from active traders.
FAQs
When was ETrade Financial Corporation founded?
ETrade Financial Corporation was founded in 1982.
Does ETrade charge commission?
ETrade does not charges commission for online US-listed stock, ETF, and options trades.
Spokesperson: Mr. Sanjay Dangi (Director, Authum Investment and Infrastructure Ltd., & Financial investor to many startups). A Chartered Accountant & Company Secretary, Sanjay is a first-generation entrepreneur with an experience of more than 25 years in Investment Banking. He’s also an avid investor in early-to-growth stage companies and a philanthropist.
In ancient Rome, a slave would hold a laurel wreath over the emperor’s head in public, whispering to him “Remember that you are mortal”. The successes of investing can sometimes make you feel like a triumphant emperor, especially when you have made big gains in a short period., Yet, whether you’re a rookie investing your first salary in the market, or a seasoned investor, it always pays to remember the dangers of the market from time to time. Here are a few big ones –
1.The Short Term Does Not Pay
Actually, it does. A few people may find that they bet on a stock when it was cheap, and it rose in a short time for them to make a handsome profit. They may call it wisdom or intelligence; I would simply call it their luck. My advice is simple:don’t invest in the stock market if you are fishing for short-term gains. You may be lucky once or twice, but the winds change unpredictably. The stock market pays when you invest for the long term. Over the years, it causes a tide that lifts all boats. Short-term losses will be washed out by long-term gains. The big geniuses you hear of (Warren Buffet, George Soros, Bernard Arnault) were never short-termers.
More boats have been sunk by the words “investor sentiment” than by any other factor in the market. I don’t think there are any other words that ought to be as far apart as these two. Investing has nothing to do with sentiment. “Exuberance”, when you invest in a bull market because everybody else is doing, is a great way to lose your head, and your money. “Panic”, when you pull out money in a bear market instead of staying invested, is your way to lose money even faster.
No two investors have the same portfolio. So why should they make the same calls? If you choose your stock portfolio as per your capability, risk appetite and homework, you have no reason to fear if a trend is downward. Unless you’ve invested in the Kabul Stock Exchange, all market trends are temporary.
3. Heed the Mutual Fund Disclaimer
It’s a bit of a joke, the way investing caution is read out speedily at the end of a mutual fund ad. But it is correct nevertheless – past performance of a stock is no indicator of the future. A stock doing well now might crash sooner or later, either because it is over-valued (“exuberance”), the company’s fortunes have declined, there has been a scandal or scam, or what some economists call a Black Swan (read the book, it’s delightful). There’s no reason for you to invest in a stock just because it is doing well (or poorly) right now, in the hopes that it will keep rising, or rebound if it is falling. And that brings us to point #4.
If you have taken #2 to heart, then this is the natural follow up. There is a reason that companies with publicly listed stocks are required to put out quarterly statements, annual reports, stock exchange filings, financial statements, shareholding reports and other documents in the public domain. That reason is you – and your financial interest. Please read these documents, and if you don’t know how to read them, there are many useful websites out there to explain, and many online courses nowadays. Look at the fundamentals: has the company been profitable, have its profits been rising or falling, does it have governance issues, does it have shady shareholding? All of these indicate whether the market will reward the stock or punish it.
A personal tip: do all your calculations and make all your notes with pen and diary, or if you prefer, an Excel sheet. Never try to hold all the numbers in your head.
5. Stay invested, but not unnecessarily
You may own stock that is currently falling. The wise men may say that the storm will tide over, and if the company’s fundamentals are fine, the stock will eventually return to its original price. If the fundamentals are fine. Investors who held on to Kodak stock when the world turned to digital photography, believed in a fairy who never came. We are naturally risk-averse and sensitive to loss more than gain. Nevertheless, if you realize the company is not doing well and not likely to do well in the future, cut your losses.
Markets may be dumb at times, but you are not smarter than the collective wisdom. There is little reason to ignore conventional wisdom (staying invested for the long term and doing your homework) and make risky investments in the hopes of making a big catch. Two-taka stocks are unlikely to rise unless there is a fundamental restructuring of the company, stocks on their way down might still go down, stocks on their way up might take a U-turn. This is of particular advice to seasoned investors, who have done well and think they can take bigger risks. I’ve been there, and trust me, it is not worth it. Yes, higher risk can lead to higher reward, but only if you hedge your investments. Make sure there are enough blue-chips in your portfolio in case your expected windfall turns into a damp squib.
These were the basics, which bear refreshment from time to time. It pays to make a list of pitfalls and pin them to your trading desk, to remind yourself, just as the slaves of the Roman emperors did.
At one point while growing a startup, every startup founder must have dreamed of is applying for an IPO. Who doesn’t wants some extra funding to grow their startup?. The Indian startup industry is growing at a fast pace. And Many startups are buckling up to apply for the IPO. But why now? Why are so many startups going public in 2021?. Let’s find out
If you are just as curious to know, follow the article
So, you hear this word floating in and out of conversations, much to an extent these days.
Startups are usually founded by one or more entrepreneurs and their company is in its initial stages of business.
These entrepreneurs involved in building startups believe that there is a demand for a certain product or a service and want to make it better by developing it.
The funding for these usually involves getting money from family or friends.
Startups need capital, so they are also on a lookout for backers to invest in them.
What is an IPO?
IPO stands for Initial Public Offering
Companies need capital, so they raise it in the forms of IPO and shares from public investors.
People have a point of view that stock prices increase after an IPO.
Following factors you can consider before going Public
The company has been financially strong for the last three years and is making good profits.
You hear about your company quite often.
The company holds a strong vision.
We are observing a trend here. Not only Indian tech startups are going public, but almost every startup is getting in the waiting list to go public in 2021.
The way for this money is paved to the path of the financial markets, mainly stocks. Now that means many of the giant institutions have plenty of money floating in so that they can invest in. Which leads us to another question: Where? These institutions now have the power to invest in IPOs.
Startups like Zomato, Nykaa, PayTM, Delhivery, some of which have already been made public and some that are gearing to go public, have the intuition that they can catch the interest of these investors.
It is becoming, a regular thing now for public valuations to overtake the private ones. Many people chip in, thinking that what they invest in will see growth in the future. The shares are rapidly growing, so if your startup is waiting to go public. There is no better chance and time than now to grab the opportunity.
Possibilities of recovery
The other part of the story is that many say that with stocks going up to the skies. With the investors and the Indian public pooling in money for the vision, your startup holds even if you have landed into the mess of running into loss. There is a chance of new money coming in. And the value of your startup will be much more than you expected.
Registrations are easier than before thanks to SEBI (Securities and Exchange Board of India)
One of the other reasons is none other than the pandemic itself. It really shook up the world, bringing everything to a halt and slowing down many aspects of our lives. Seeing the stability and growth, the other startups are sure in a hurry to get themselves listed as soon as the pandemic did put a stop to the process. And it would not hurt to take advantage of the situation and accelerate it.
There’s a well-said quote that “When money speaks, no one in the entire universe checks the grammar”. That’s true, no doubt, and the whole world acknowledges this truth right now.
If in the foreign stock market, the value of the share a person has bought increases, the financial profit out of it gets unimaginable hype. Just as an example, Warren Buffet, at the age of 11, had made a profit of 40* times than his investment. His twenty-dollar investment turned into 800 dollars at the end when he withdrew his earnings. One needs to put money into the perfect hole if they want to surpass other competitors in the league. For that, the best place is no doubt ‘The Stock Market’.
Have a look at your daily life. You will notice, being in any corner of the country, you have been using so many international brands. Some brands are so integrated into our lives that it becomes difficult to imagine a day without them.
Products of Apple, Google, Amazon, Netflix are flourishing every second. These international brands have competitive skills and can never let their brand down. By imagining the growth and market value of these brands, you can imagine how gigantic these foreign stocks can skyrocket your investment.
As these brands have significant uses in our daily life, and if these uses gain a massive profit for you, then it will be a wiser choice to invest in these foreign stocks.
How To Invest In Foreign Stocks?
How to invest in Foreign Stocks
Stock investment is now becoming easier. Many agencies and brokerage houses are flourishing all over the world. The international stock investment is now connecting its network everywhere.
One crucial thing everybody should understand before going with any brokerage house. Many scams and fraud brokerage houses are also settled in the market. The bunch of crooks can engulf your entire investment and leave you with a considerable loss.
If you are new in stock investment or have little knowledge, then you might have heard about Karvy Stock Broking. This particular brokerage house did a massive scam of 2800 crores. It reduces the trust of many future investors. The Karvy investors bear a massive loss due to this scam. The vital lesson we have learned here is “to follow the big names”. It would help if you stuck with a big brokerage house providing these services with years of experience. They must have delivered a decent amount of profit to its wide users.
You may belong from any country, some big brokerage houses must be there. Do healthy research, talk to different experiences in esters, and then decide on a good brokerage house. In India, some big names include ICICI Direct, HDFC Securities, Axis securities. They have tied up with foreign brokerage houses. You can prefer any one of these. Some of the most famous apps are Groww, Upstox, and Angel Broking.
This is one of the most asked questions. The direct answer of this amount varies with the brokerage house. Along with that, your investment amount also decides your transaction rate. You could see the compulsory transaction charges in almost every brokerage house. The transaction charges, at a minimum, can be from 5 US dollars to $15. At maximum, it can go up to $50 in the same cases. It depends upon the stock you choose from which country. You can invest in more than 18,000 stocks as per their presentation and explanation webinar and seminars. Better it would help if you compared all the charges and commissions of all the brokerage houses.
Another necessary charge that can be applied to cases of investment is the currency conversion rate. Depending on the company’s stocks based on which country, the invested money needs to be converted according to the currency of the respective country. A small charge may be there by the respective banks for the currency conversion. Some mobile apps also provide investment services with similar, maybe lesser charges, and some have zero transaction charges. The services which provide zero transaction charges will ultimately cut some commissions from the investment returns.
If you’re gaining some capital gain, then taxation is no doubt terminology. You must be paying taxes to the respective country’s government, according to Indian taxation rules. Whatever investment you are going to do that will be according to the debt fund taxation. The fund withdrawal is divided into 2 set periods.
Short-term capital gain
Long-term capital gain
The taxes will vary with your withdrawal period.
One is the short-term capital gain which is a period of fewer than 3 years. If within your investment period you withdraw your amount before 3 years, then taxation will be according to your tax slab. According to the 2nd withdrawal rate, if you withdraw your amount after 3 years, the taxation will be 20 percent with indexation benefits. This will be your long-term capital gain. One important thing you should consider is that if you’re gaining some dividends in such cases, it will be added to your normal income. You have to pay tax for it; it will be more complex in such cases. You need the required documents to show the government for significant clarifications.
These were the most prominent ways to invest in the foreign stock market and extract your money from it. But with the international market, the probability of risk rises too and that, in turn, raises the chance of heavy loss if the Sensex crashes. Keeping the risks aside, the above three ways are the easiest ways to access the International market from India without mobilizing. The ways are all legit and can serve the right person with the tastiest profits.
To make more significant profits from foreign stocks, one must, in the first place, do a complete analysis of how the market there is and what can be the possible pros and cons of investing in their market. The amount of profit from the share market always lies on how good a person can foresight the market value keeping in mind all the current affairs. That’s the best way to make profits from the equity market.
FAQs
Can we invest in foreign stock markets from India?
Yes, we can invest in foreign stock markets from India.
How much can we invest in foreign stocks from India?
As per the RBI notification in the Liberalised Remittance Scheme (LRS), an Indian resident individual can only invest up to $250,000 in foreign stocks per year.
Is stock trading legal in India?
Yes, Stock trading is legal in India. Securities and Exchange Board of India (SEBI) manages the rules, regulation and supervision of the stock markets in India.
Silicon Valley has seen a lot of successful startups and the emerging of the big tech companies such as Google, Facebook, etc. But there has been a recent news where a CEO of one of the companies had become a billionaire and had failed in the Silicon Valley. In this article let’s look at who exactly is Takanori Nakamura and how he turned to be a billionaire.
Takanori Nakamura a CEO who had failed in the Silicon Valley has become successful in his home country. His company’s stock price has surged and provided a return of around 4,500%. He was pulled out of Silicon Valley in the year 2015 after his mobile marketing software had failed and later on decided to completely take his business into Japan which is his home country.
Now the efforts put by him are paying off and his company Rakus Co. has seen a surge in its stock price of more than 4000% since the day it was listed in Tokyo. The company that year was also one of the best performances on the stock market index of the country.
About Rakus Co.
Rakus Co. is the latest startup in Japan which created a vast wealth for its founder which saw a surge in its price after the company went public. The company is considered to be an example of how some of the hot stocks of the country apply cloud based software and Artificial Intelligence into business ideas which a lot of people consider it to be boring.
Takanori Nakamura owns around 34% stake in the cloud based expense software firm and serves as the president and the chief executive officer of the company. According to the Bloomberg Billionaires index, his net worth has seen a surge to around USD 1.9 billion.
Takanori Nakamura has conveyed that he doesn’t feel real about his newfound wealth. One of the major dreams of Nakamura was to be able to eat out without worrying about the cost and now he is grateful that he doesn’t have to worry anymore.
Nakamura used to love reading the tales of rags to riches as a boy and had decided in high school that he wanted to be an entrepreneur. He had finished his graduation from Kobe University and soon after that, he joined the telecommunications giant Nippon Telegraph and Telephone Corp in the year 1996. However, after a year he had quit the company.
He founded a company in the year 2000 which is a predecessor of Rakus Co. The company had provided training to engineers on how to use and operate the Linux which is an open source operating system. The company later had branched out in different areas where it provided services such as email services and a software that helped in automating the data processing.
In the year 2009, the company had launched its main business which the current business of Rakus Co. The company released a software called Raku Raku Seisan which means easy easy settlement in English. This software helped the workers to create expense reports online and later the company had developed a mobile version of the software as well.
In the initial stages, the Software had failed to take off and Nakamura had set his sights and thought that they would win and succeed in the Silicon Valley. He had planned to develop a software which helped the companies to analyze how effective their ads that are run on social media and to whether decide to pull or continue to run their ads.
He had a thought that the company required a pull in the overseas market because the population of Japan was declining during that period of time. But eventually, the idea and the business had failed in the Silicon Valley.
According to Nakamura, the US based companies were pouring in investments in the Silicon Valley and competing with them was kind of impossible for them. So later on, he realized that with the given resources the company has a better chance to win in their home country and in the year 2015 Rakus Co. had gone public on the Tokyo stock exchange.
The company started taking off as Smartphones became more popular in Japan. According to the company, the software developed has more than 8,000 corporate customers. The company is also estimated to have a potential for medium term and long term growth.
FAQ
What is the net worth of Takanori Nakamura?
The net worth of Takanori Nakamura is 180 crores USD.
Who is Takanori Nakamura
Takanori Nakamura is the founder and CEO of cloud software firm Rakus, his company offers cloud-based solutions for small and medium business enterprises. He founded Rakus in 2000 and the company went public in 2015.
