A B C D E F G H I J-K L M N O P-Q R S T U V W-Z
S Corporation: A corporation that limits its ownership structure to 100. An S corporation does not pay taxes, rather, similar to a partnership, its owners pay taxes on their proportion of the corporation's profits at their individual tax rates.
SBIC: Small Business Investment Company. A company licensed by the Small Business Administration to receive government leverage in order to raise capital to use in venture investing.
Secondary funds: Partnerships that specialize in purchasing the portfolios of investee company investments of an existing venture firm. This type of partnership provides some liquidity for the original investors. These secondary partnerships, expecting a large return, invest in what they consider to be undervalued companies. The big difference is that they are buying their interests in a fund after the fund has been at least partially deployed in underlying portfolio companies. Unlike fund of fund managers, which generally invest in blind pools, secondary buyers can evaluate the underlying companies that they are indirectly investing in.
Secondary Market: The market for the sale of partnership interests in private equity funds. Sometimes limited partners chose to sell their interest in a partnership, typically to raise cash or because they cannot meet their obligation to invest more capital according to the takedown schedule. Certain investment companies specialize in buying these partnership interests at a discount.
Secondary Sale: The sale of private or restricted holdings in a portfolio company to other investors. See secondary market definition.
Sector Funds: An investment strategy that takes long and/or short positions in the companies of specific sectors of the economy, for example, biotechnology, financials, and Information Technology.
Securities Act of 1933: The federal law covering new issues of securities. It provides for full disclosure of pertinent information relating to the new issue and also contains antifraud provisions.
Securities Act of 1934: The federal law that established the Securities and Exchange Commission. The act outlaws misrepresentation, manipulation and other abusive practices in the issuance of securities.
Securities and Exchange Commission: The SEC is an independent, nonpartisan, quasi-judicial regulatory agency that is responsible for administering the federal securities laws. These laws protect investors in securities markets and ensure that investors have access to all material information concerning publicly traded securities. Additionally, the SEC regulates firms that trade securities, people who provide investment advice, and investment companies.
Seed Money: The first round of capital for a start-up business. Seed money usually takes the structure of a loan or an investment in preferred stock or convertible bonds, although sometimes it is common stock. Seed money provides startup companies with the capital required for their initial development and growth. Angel investors and early-stage venture capital funds often provide seed money.
Seed Stage Financing: An initial state of a company's growth characterized by a founding management team, business plan development, prototype development, and beta testing.
Senior Securities: Securities that have a preferential claim over common stock on a company's earnings and in the case of liquidation. Generally, preferred stock and bonds are considered senior securities.
Series A Preferred Stock: The first round of stock offered during the seed or early stage round by a portfolio company to the venture investor or fund. This stock is convertible into common stock in certain cases such as an IPO or the sale of the company. Later rounds of preferred stock in a private company are called Series B, Series C and so on.
Sharpe Ratio: A ratio calculated by subtracting the risk-free (Treasury bill) rate from a portfolio's total return and then dividing this by its standard deviation. Because the numerator is the portfolio's risk premium, the resulting faction indicates the risk premium return earned per unit of total risk. It measures the reward-to-risk efficiency of an investment. The Sharpe ratio seeks to measure the total risk of the portfolio by including the standard deviation of returns rather than considering only the systematic risk by using beta. In general, a higher Sharpe ratio suggests stronger risk-adjusted performance.
Shell Corporation: A corporation with no assets and no business. Typically, shell corporations are designed for the purpose of going public and later acquiring existing businesses. Also known as Specified Purpose Acquisition Companies (SPACs).
Short Only: An investment strategy based on the sale of securities that are overvalued from either a technical or fundamental viewpoint, normally used when a bear market is imminent. The investor does not own the shares sold. They are borrowed from a broker, in anticipation that the share price will fall and that shares may be bought later at a lower price and can then replace those borrowed earlier from the broker. Expected volatility may be very high.
Short Selling: The practice of borrowing a stock on collateral, immediately selling it on the market with the intention of buying it back later at a lower price.
Small Business Administration (SBA): Provides loans to small business investment companies (SBICs) that supply venture capital and financing to small businesses.
Small Business Innovation Development Act of 1982: The Small Business Innovation Research (SBIR) program is a set-aside program (2.5% of an agency's extramural budget) for domestic small business concerns to engage in Research/Research and Development (R/R&D) that has the potential for commercialization. The SBIR program was established under the Small Business Innovation Development Act of 1982 (P.L. 97-219), reauthorized until September 30, 2000 by the Small Business Research and Development Enhancement Act (P.L. 102-564), and reauthorized again until September 30, 2008 by the Small Business Reauthorization Act of 2000 (P.L. 106-554).
Soft Dollars - Payment for brokerage services, such as research, through commissions or directed underwriting rather than fees.
Special purpose vehicle: A special company, usually outside the United States, established by a company to meet a specific financial problem, often to pay lower taxes (e.g., a reinvoicing subsidiary or offshore insurance company).
Special Situation: An investment strategy that focuses on investing in companies the will or are undergoing events that will affect the price of a stock. An example would be a merger, spin-off or restructuring.
Spin out: A division or subsidiary of a company that becomes an independent business. Typically, private equity investors will provide the necessary capital to allow the division to "spin out" on its own; the parent company may retain a minority stake.
Staggered Board: This is an antitakeover measure in which the election of the directors is split in separate periods so that only a percentage (e.g. one-third) of the total number of directors come up for election in a given year. It is designed to make taking control of the board of directors more difficult.
Standard & Poor's 500 Index (S&P 500®) - The S&P 500® is a registered trademark of The McGraw-Hill Companies, Inc., and has been licensed for use by Fidelity Distributors Corporation and its affiliates. It is an unmanaged index of the common stock prices of 500 widely held U.S. stocks. Standard & Poor's (a unit of The McGraw-Hill Companies, Inc.) calculates the market prices of these stocks, including the reinvestment of dividends as a way to track the performance of the stock market in general.
Standard & Poor's Midcap 400 Index (S&P 400) - The Standard &Poor's Midcap 400 Index is a market capitalization-weighted index of 400 medium-capitalization stocks.
Standard Deviation - A statistical measurement of the dispersion about a fund's average return over a specified time period. It describes how widely returns vary over a designated time period. Investors may examine historical standard deviation in conjunction with historical returns to decide whether a fund's volatility would have been acceptable given the returns it would have produced. A higher standard deviation indicates a wider dispersion of past returns and thus greater historical volatility. Standard deviation does not indicate how the fund actually performed, but merely indicates the volatility of its returns over time.
Statistical Arbitrage - Market neutral relative value investment strategy that involves the utilization of a quantitatively based investment methodology that identifies securities or groups of securities that are currently trading at prices out of their historical range. Will involve establishing a long position in an undervalued security and short selling an overvalued security.
Statutory Voting: A method of voting for members of the Board of Directors of a corporation. Under this method, a shareholder receives one vote for each share and may cast those votes for each of the directorships. For example: An individual owning 100 shares of stock of a corporation that is electing six directors could cast 100 votes for each of the six candidates. This method tends to favor the larger shareholders. Compare Cumulative Voting.
Stock Index Arbitrage: An investment strategy that involves buying a "basket" of stocks and selling short stock index futures contracts or vice versa.
Stock Lending - A loan of a security from a legal holder to a borrower. The borrower uses the stock as their own, but remains liable to the loaner for all benefits the stock may produce such as dividends, etc. Stock lending began as a way to cover short sales, but has evolved by being incorporated into many hedge fund trading strategies.
Stock Options: 1) The right to purchase or sell a stock at a specified price within a stated period. Options are a popular investment medium, offering an opportunity to hedge positions in other securities, to speculate on stocks with relatively little investment, and to capitalize on changes in the market value of options contracts themselves through a variety of options strategies. 2) A widely used form of employee incentive and compensation. The employee is given an option to purchase its shares at a certain price (at or below the market price at the time the option is granted) for a specified period of years.
Strategic Investors: Corporate or individual investors that add value to investments they make through industry and personal ties that can assist companies in raising additional capital as well as provide assistance in the marketing and sales process.
Subscription Agreement: The application submitted by an investor wishing to join a limited partnership. All prospective investors must be approved by the General Partner prior to admission as a partner.
Swaps - Agreements between at least two counter-parties to exchange cash flows in the future according to a pre-specified formula. They can therefore be regarded as portfolios of forward contracts. The most common one is an agreement on the exchange of a fixed rate for a floating rate contract.
Sweat Equity: Ownership of shares in a company resulting from work rather than investment of capital--usually founders receive "sweat equity".
Syndicate: Underwriters or broker/dealers who sell a security as a group. (See Allocation)
Syndication: A number of investors offering funds together as a group on a particular deal. A lead investor often coordinates such deals and represents the group's members. Within the last few years, syndication among angel investors (an angel alliance) has become more common, enabling them to fund larger deals closer to those typifying a small venture capital fund.
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