Dave's ESL Cafe's Student Discussion Forums

[zeppy]

What's the meaning of the underline terms ,thanks in advance !
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SMIC's Underwriter Buys Shares To Stabilize Stk After IPO

4/16/04 12:28am


HONG KONG (Dow Jones)--Semiconductor Manufacturing International Corp. (SMI) said Friday its listing underwriter didn't exercise an option to sell more of its initial public offering shares, but bought SMIC stock to support its share price.

The overallotment option, covering 772.7 million old shares, was equivalent to 15% of the retail tranche of SMIC's initial public offer.

In addition, SMIC's global offering coordinator Credit Suisse First Boston ( Hong Kong) Ltd. bought 234.2 million SMIC shares and 10.8 million American Depository Shares during a stabilization period that ran from March 11 to April 10.

The Hong Kong shares were bought at prices ranging between HK$2.10 and HK$ 2.475, while the ADSs were taken up at between US$14.30 and US$17.0.

SMIC began trading on the Hong Kong stock exchange's main board on March 18. Within the first three trading sessions, the stock fell as much as 20% from its IPO price of HK$2.69.

Stabilization is a practice used by underwriters to bid for or purchase shares of newly listed securities in the secondary market during a specified period of time to retard or prevent any decline in the market price below the offer price. In Hong Kong, the price at which stabilization is undertaken can't exceed the offer price.

[bud]

Hi Zeppy,

I saw this earlier this week, but didn't reply since I only know the first one. Since nobody else replied, I'll at least tackle that one for you:

An option is something that is purchased (or given) regarding the future. For example, I could buy an option to buy shares of Microsoft for a predtermined price by a certain date. That is, I might buy an option to purchase 100 shares of Microsoft for $112 a share anytime before July 25, 2004. It is a way of investing (betting) on whether the price of a share will rise or fall. If by July 25th the price remains below $112, then I will not exercise the option, which means I will not buy the shares. If the price is, say, $117, then I will exercise my option, which means I will buy the 100 shares for only $112. If the cost of the option was less than $5 a share, then I will have made a profit.

I hope that helps.

(If you haven't already, try a google search on the other two. I'm sure you'll find something useful.)