Stocks

TYPES OF SHARES BY FORMAT

Documentary shares

Documentary shares exist as a tangible security printed on paper. They have a cover where information about the share is located (nominal value, issuer and more), a coupon sheet for dividend payments is attached to the cover with a talon, for which the shareholder gets a new coupon sheet.

Book shares

These are booked in the securities register. For this type of shares, the company can evaluate the amount of paid dividends every year and send the dividend home.

TYPES OF SHARES BY FORM

Registered shares

These are issued in the name of the particular shareholder (natural person or legal entity). In documentary format, the share bears the owner’s name written on it and then it is transferred by endorsement and physical handover. In booked format, shares are transferred by agreement and registration of the transfer with the issuer. Registered shares benefit from better protection against theft.

Bearer shares

Bearer shares are freely sold without restrictions or the necessity to register the current owner. The owner of the share is the person who presents the security. Bearer shares benefit from easy tradability in secondary markets.

SHARE TYPES BY KIND

Ordinary shares

This is the most common type of shares with the right to receive dividends, attend the general meeting and the right to a share in the liquidation assets.

Preferred shares

These shares are associated with preferential rights for payment of dividend or share in the liquidation balance, as well as limited voting rights. However, such limitations must be stipulated in the Articles.

Employee shares

These shares are intended for employees of the company; usually, they are issued at preferential price as part of motivation. Shares must be returned to the company after termination of employment.

Golden shares

Golden shares were issued in the early 90's to accommodate needs associated with privatisation of state enterprises.

SHARE CLASSIFICATION (by share price trends)

Growth stocks

Stocks of mostly hi-tech companies with a high growth potential who allocate most funds to further projects instead of dividends. The reward may be high, but with significant risk.

Defensive stocks

Their prices are not influenced too much by the current stage of the economic cycle - when stock prices generally fall, development of defensive titles is far from being as dramatic as development of other stocks. They are often associated with dividends outperform the market.

Cyclic stocks

Their price rises or falls depending on the current stage of the economic cycle. In growing markets, they attain better returns that the rest of the market, while they underperform the market during overall declines.

STOCK TRADING

Stocks are traded on public stock exchanges and sometimes in OTC markets. In the case of trading on a stock exchange, rules of the respective exchange must be complied with (trading batches, types of instructions, trade settlement, etc.). If a title is listed on multiple stock exchanges in different currencies (such as US stocks listed in the euro on the Frankfurt stock exchange), foreign exchange risk must be also taken into account.

In the Czech Republic, there are two securities exchanges: Prague Stock Exchange and RM-System Czech securities exchange.

The Prague Stock Exchange is the most important stock exchange in the Czech Republic operating the primary market with stocks in the country, and is seated in the centre of Prague. The PSE stock index is named PX. PSE is governed by the capital market business Act and the exchange rules stipulated by the stock exchange. All of its activities are under supervision of the Czech National Bank. The rules used are harmonized with the EU.

The supreme body of the stock exchange is the general meeting that discharges and elects members of the Exchange Chamber and Supervisory Board, the supervisory body. The Exchange Chamber is in charge of managing the operations of the exchange and it is the statutory body acting in the name of the exchange. The Chamber can also establish Exchange Committees that are in charge of specific activities and elect the exchange director.

RM-SYSTÉM, česká burza cenných papírů a.s. is a securities exchange trading stocks of Czech and foreign companies. Its primary focus is on minor and medium-sized investors.

RISKS ASSOCIATED WITH STOCK

Return

Return on investments in stocks consists of paid dividends and price gain or loss, and cannot be estimated with certainty. Dividends stand for profits distributed among shareholders in line with a decision of the shareholders' meeting. The amount of dividend is expressed either as absolute value per share or as percentage of the share's nominal value. Returns on dividends against the share price are identified as dividend yield. Generally speaking, dividend yield is notably smaller that the dividend determined as percentage of the nominal value.

A bigger part of the results of investments in shares usually comes from performance of the security / price trend (see price risk).

Price risk

Shares are usually traded on a public stock exchange. The prices - quotes are usually set every day based on offer and demand. Investments in stocks can result in great losses.

Generally speaking, share prices depend on the business trend of the given company, as well as the overall economic and political environment. However, trends of stock prices and thus also returns for investors can be also influenced by irrational factors (investor moods, public opinion).

If the issuer becomes insolvent, loss of the invested capital can occur.

Credit risk

The shareholder is holding a share in the company. Thus, his or her investment can lose full value, mostly in the case of the company's insolvency.

Liquidity risk

Tradability can be limited in the case of shares with a narrow market (mostly shares listed in an unregulated market, OTC market trades). If the share is listed on several stock exchanges, there can be differences between transferability of the title on certain international exchanges (such as listing of US shares in Frankfurt).

Equity Desk:

Eva Polánová +420 234 401 803
Jakub Schermer +420 234 401 838
Jakub Veselský +420 234 401 819
Richard Skácel +420 234 401 827

TECHNICAL SUPPORT