Private Equity & Venture Capital
Funds investing in private companies - buyouts and startups.
What is Private Equity & Venture Capital?
Private equity funds buy established companies, often with borrowed money (leveraged buyouts), improve them, and sell. Venture capital funds back early-stage companies. Both are highly illiquid, often with 10-year lives. Investors commit capital that the fund draws down through capital calls over time.
Private Equity & Venture Capital: a worked example
A $10M commitment to a buyout fund may take four years to be fully called and ten to be returned.
More terms in Equities, Funds & Alternatives
Shareholder Rights (Statutory vs. Cumulative Voting)
Voting, preemptive rights, dividends when declared, inspection, limited liability.
Types of Preferred Stock
Cumulative, convertible, callable, participating, and floating-rate preferred.
American Depositary Receipt (ADR)
A dollar-denominated receipt for foreign shares, traded in the US.
Rights vs. Warrants
Rights: short-term, below market. Warrants: long-term, above market.
Restricted & Control Stock (Rule 144)
Unregistered or insider-held stock with resale limits.
Employee Stock Options (ISO vs. NSO)
Incentive options get capital gains treatment; nonqualified options create income at exercise.
Technical Analysis
Forecasting prices from charts, trends, and trading volume.
Fundamental Analysis
Valuing a company from its financial statements, management, and industry.