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Shareholders and share price Learning objectives • Identify the factors that may influence share price • Evaluate the impact of share prices on a company Learning outcomes Starter 1. 2. 3. 4. 5. Who typically buys shares? Why do shareholders invest in a company? What is market capitalisation? What is market capitalisation formula? What percentage of shares do you need to buy to take ownership control of a Plc? Starter 1. Who typically buys shares? Individuals but mainly financial institutions like banks, insurance companies 2. Why do shareholders invest in a company? To get a financial return, long term or short term gain 3. What is market capitalisation? Total value of the issued shares of a Plc 4. What is market capitalisation formula? Share price x no of shares issued 5. What percentage of shares do you need to buy to take ownership control of a Plc? 51% or more LO Impact of share prices on a company Influence on share price and impact of share price changes Impact of share prices Case study on Serco… Stick it in your book and answer the questions EXTENSION TASK: What recommendations would you make to Serco to enable them to build back confidence in the services they provide? Shareholders Ultimately a company would like to maintain a strong share price to help attract new financial investors and to demonstrate managerial competence. A falling share price puts the company in danger of takeover and can destabilise a company’s management team. LO Impact of share prices on a company What have we learnt so far What can you tell me about impact of share price on a company? Tell me 3 factors that influence share price? Continue with presentation preparation (20 min MAX) Case study – VW and the emissions scandal https://www.youtube.com/watch?v=wGzyt5y2Q5c#action=share Case study 2 – Merlin Entertainments Impact of Smiler incident: • Shares decreased • Merlin Entertainments issued profit warning • Visitor numbers in decline at Alton Towers • Weak euro also impacted on London attractions Case study - Greggs http://www.bbc.co.uk/news/business-34451796 Group Group A Group B Group C Kieran Francesca Viennah Beth Mohammed Ola Charlie Chris Sara Fatma Ahmed Ajmal Justin Yasser Exam style question Benacre plc manufactures a range of components for high technology products such as mobile phones. It is very profitable and has a rising share price. Explain 2 risks in buying shares in Benacre plc. (6 marks) Extension… what advice would you give a potential investor in Benacre plc 20 min Quick quiz 1. 2. 3. 4. 5. What is the impact of a share price rising? What is the impact of a share price decreasing? What factors can influence share price? Describe 1 impact of a falling share price on a business? List 1 advantages and disadvantage for a business to float on the stock exchange Understand the role of shareholders Describe why shareholders invest in a company Impact of share prices on a company Quick quiz 1. What is the impact of a share price rising? Confidence in company, attracts potential investors, able to raise more capital 2. What is the impact of a share price decreasing? Worried investors, may choose to sell their shares, difficult to get new investment, consumer confidence and they may go to compeitior 3. What factors can influence share price? Company performance, economy, consumer spending, weather? 4. Describe 1 impact of falling share price on a company? Hard to attract top quality employees, harder to raise finance 5. List 1 advantage and disadvantage for a business to float on the stock exchange can raise capital easily, raise profile, risk of take over, share price decrease could result in less consumer confidence Understand the role of shareholders Describe why shareholders invest in a company Impact of share prices on a company Learning outcomes ALL E-D MOST C-B SOME A-A* Identify what a shareholder is Explain what influence the shareholder can have on decision making Recommend 3 things a potential shareholder should consider before deciding on buying shares State 1 reason for investing in a business Explain how a shareholder is rewarded (or not) Compare the benefits and risks of buying shares Describe 1 factor that might influence the share price of a Plc Describe 1 impact of share price increase or decrease on a company Evaluate the impact of share price increase and decrease has on a business What’s your target grade? Are you confident you can answer your questions? Further resources http://www.telegraph.co.uk/finance/personalfinance/investing/shares/ 11882164/Have-you-learned-the-lesson-from-VWs-35pc-share-pricefall.html