Good morning, dear colleagues. I’m glad to see everyone here. Thank you for your coming. Let me start by introducing myself. My name is Elena Torlopova. I’m a freshman of the State University of the Ministry of Finance of the Russian Federation. I study at the department of the international economic relations. My aim for today’s presentation is to give you information about Shares and Joint Stock Companies in the New Economic Model I plan to be brief. My presentation will last only 5 minutes. As you can see, my presentation is divided into 3 main parts. At first I would like to give you the basic concepts and characteristics of joint-stock companies. Then I would like to take a look at benefits and lacks of joint stock companies. Lastly we are going to discuss the definition of blue chips and consider a situation where they are used. Please interrupt me if there is something which needs clarifying, otherwise there will be time for your questions at the end of my talk.
The main information about joint stock companies
Joint-stock company (JSC) is a company, the authorised capital of which is divided into a certain number of shares owned by shareholders. Shareholders bear no responsibility for its obligations and run the risk, within the value of shares belonging to them, of losses associated with the company’s activity. A joint-stock company in which shares can be traded freely and which may have unlimited number of shareholders is an ‘open’ joint-stock company. A joint-stock company which shareholders have a pre-emptive right to buy shares sold by other shareholders is a ‘closed’ joint-stock company. Such a company has no right to hold a public subscription to its shares or for that matter offer them for sale to the general public.
Advantages and disadvantages of joint stock companies
The company provides so many advantages that it is widely popular all over the world. The main advantages are:
A company can raise large amount of resources from the genera public by issuing shares.
The liability of the shareholders is limited to the extent of the face value of the shares held by them or guarantee given by them.
The entire business risk of a company is distributed over a large number of shareholders. Thus, the risk is reduced for each shareholder. Despite the above advantages, the company form of organisation also suffers from certain demerits.
It is controlled by a small group of Board of Directors who hardly protect the interest of other shareholders.
Lack of secrecy
It is very difficult to maintain business secrecy in a company because of every business strategy is discussed in the meeting of the Board of Directors and the annual accounts are published and compliance to Government.
The directors and managers may function for their personal gain overlooking the interest of the company.
Blue chip stock constitute shares or securities of large reliable companies with stable indices derived from income and dividends paid. In essence, the term blue chip is employed in the stock markets by analogy to describe the actions of well-established entities. The term was coined by Oliver Gingold of Dow Jones & Company in 1923. It is reported that the term was born when Gingold was taking note of several businesses with shares priced at $ 200 per share or more. And went on to indicate intentions of writing an article about the “blue chips”. Thus the term was born. Typically, blue chips are indicators of the overall market. Blue chip shares are the most liquid securities market. The list of blue chip stock changes periodically, but there are always those that manage to stay on top for years.
Examples of the western blue-chip companies are Apple, IBM, The Coca-Cola Company, Ford, Google, etc. In Russia blue chips occur mainly in the oil, gas, energy and telecommunications companies. In particular, the blue chips include such companies as Gazprom, Lukoil, Norilsk Nickel, Rosneft, Sberbank, Rostelecom, RusHydro, Polyus Gold, etc. These companies typically have leading positions in the RTS and MICEX. As you can see on the pie chart 15 percent of “blue chips” belong to Gazprom. It means that Gazprom shares are the most liquid in terms of sales and account for 15 percent of the total trading volume on the market.
The second largest sales shares owned by Lukoil. They constitute 14, 02% of total trading in the market. Sberbank is the third after a Gazprom and Lukoil amounts to 13.88% of sales of its shares on the market. Norilsk Nickel and Rosneft makes 7.56% and 7% of sales in the market, respectively. And finally Surgutneftegas and VTB Bank constitute 4,82% and 4,28% of sales in the market. Thus the total weight of seven securities in the index is 67%, which implies that it is these securities provide direction and determine the dynamics of the Russian market as a whole.
We gave the definition of the concept of joint-stock company and it basic characteristics. Then we looked at the advantages and disadvantages of joint stock companies. And in the end we discussed the stock market, and specifically the “blue chips” and looked at the dynamics of the sales of seven major “blue chips” Russia. So, in conclusion I would like to say that joint-stock form of entrepreneurship plays an important role in the formation of normal conditions of operation of enterprises, allows shareholders to raise funds for its activities, and each worker can become the owner of the company, through acquisition of shares, each shareholder reduces the risk of losing a significant amount of money (each at risk only to the extent of its sum shares) allows you to work more efficiently, since all are interested in making profits and dividends It should be emphasize once again that the joint stock company – is a unique form of collective ownership of the implementation, where everybody interested in the results of its operations.