We examine in this chapter the valuation of ordinary shares. Ordinary shares, or equities as they are also known, are by far the most important type of security issued by UK companies. On 31 March 1982, there were 1,708 loan capital securities and 1,194 preference shares of UK companies quoted on the Stock Exchange, compared to 2,058 ordinary shares,1 and yet the ordinary shares represented 95% of the market value of all these UK corporate quoted securities. The ordinary shares were worth £103,620m., more than the market value of UK gilt-edged stock of £81,087m. Despite this, ordinary shares represented 23% of the total market value of the UK Stock Exchange on that date. This percentage figure is misleading, since 55% of the Stock Exchange’s total market value consisted of the securities of overseas companies, that is, shares which are quoted primarily on overseas stock exchanges. If these shares are excluded, UK company ordinary shares represented 52% of the market value of the Stock Exchange with gilts contributing a further 41%. Ordinary shares are also quoted on the unlisted securities market, mentioned in Chapter 1, but the value of these shares is small in comparison to listed shares.
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- 5.See Fison’s fourth Stockholder Survey (1979).Google Scholar