5.1 Investment choices – Equity Instruments

Equity Instruments is an instrument that is issued to company shareholders, it is used to fund the business. Equity holders will be as a business owner including the interest or rights in property and income of the business and likely to get the dividend as the returns. There is not binding that an equity that issued by a company must return a dividend; it’s based on profits and the terms of its business. Equity instrument is divided into several types:
1. Common Stock is an equity instrument that is issued by a public company to raise capital from the public. The shareholders will be entitled to co-own the company and has the right to vote at the shareholders meeting according to the proportion of shares, has the right to decide in the important issues such as raising capital to pay dividends, merging business. Beside that the shareholders are entitled to receive dividends when the company profits and have the opportunity to profit from the difference in price when the stock prices rise with the potential of the company. Also including the opportunity to subscribe for new shares when the company increased capital or issue a new allocation to the shareholders.
2. Preferred Stock is an equity instrument that the holders participate as a business owner like the same as the Common Stock. The difference is that the preferred shareholders are entitled to have repayment of capital before the common shareholders. In case that the company is out of business from these holders, the preferred shareholders may not be able to vote at a meeting in decision-making affairs of the business administration.
3. Convertible Debenture is similar to a common bonds, the difference is that a convertible debenture can convert into common stock during the specified rates and prices in the prospectus. Convertible debenture has been very popular during the good economic because the buyers expect that the profitable returns from converted stock will be much than the interest returns from common bonds.
4. Warrant is the instrument that grants the holder in buying stock with underlying asset, such as common stock, preferred stock, common bonds or shares derivatives according to exercise price (commonly used is the ratio) and within a predefined expiration period, which you can not use these rights after the expiration.
5. Derivative Warrants (DW) is the instrument that looks similar to common warrant. The issuer company entitled the DW shareholders rights to buy or sell the underlying securities. This may be a stock or index in the exercise price, exercise rate and the exercise period specified by the issuer, and it may deliver in securities or cash. Currently, SEC committee requires that the issuers can issue only to derivatives that entitled the right to sell the underlying security. A derivative warrant is used to manage the risk of the investment, both the issuer and the buyer. Especially the institutional investors those own a lot of common stocks such as mutual funds, insurer. This can be used as a tool to prevent damage caused by fluctuations of the securities prices.
6. Transferable Subscription Rights (TSR) is the instrument that a company issues to all shareholders in proportion number of the existing shares. It is used as evidence in shares of the company. If the existing shareholders do not wish to exercise the shares, they can sell or transfer rights to others which are beneficial to the shareholders with the opportunities and more options to invest. It is also the added liquidity to its share and the company can raise more capital according to the goal. In addition, it solves the investment limitation problems of foreign investors by subscription to TSR shares. With TSR, it can used to sell in the Exchange market.
7. Non – Voting Depositary Receipt (NVDR) is an instrument that issued by the Thai NVDR Co, limited, irrespective of their status as securities registered automatically (Automatic List) and underlying asset as a common stock, preferred stock. NVDR rights can be transferred as it is registered in the Exchange market, the investors can trade NVDR as common registered securities.
8. Depository Receipt (DR) is the instrument issued and offered by Siam DR Co, limited. It entitles the rights to reference ordinary debentures, common bonds, and convertible debentures. Investors holding the DR will receive benefits as shareholders of listed companies in all respects whether the financial rights or voting rights in the listed companies. In voting rights, the holders of warrants must be Thai and can vote only through Siam DR Co, limited.