Champagne Stock
Champagne stocks are those that have seen a big increase in value, typically doubling or tripling (or more!), in a short period. Why is it called a champagne stock? That's open to some interpretation. Is it because you're celebrating that it has gone up so fast? Or is it a sign that the stock has gotten...bubbly?
Example? Okay, you talked us into it...Picture it: American Airlines, 2013. The company was skidding toward oblivion, already filing for bankruptcy. But wait! A savior comes! American is pulled out by the announcement that it would merge with rival U.S. Airways. American Airline shareholders would get 3.5% of the combined company.
Boom! The stock went from less than $1 in 2012 to a price around $12 a share. That's not a super expensive stock price, but it represents a huge jump from the sub-buck realm. It's even more champagne-celebration worthy when you consider that typically the owners of stock in bankrupt companies end up getting no payout.
Related or Semi-related Video
Finance: What is a hot issue?2 Views
Finance allah shmoop What is ah hot issue All right
Well it's one that has demanded more than it is
supplied One that is loved more than it is hated
One that is hot more thin it's gold Well the
most common hot issue in the press You read about
all the time Yeah It's an aipo that everybody wants
Why Well it's basically free money to the investors Price
talk has been ten to twelve dollars a share And
well then it looks like it's moved twelve to fifteen
and out price doc's fifteen to eighteen a share And
traders are mumbling that the first actual traded print will
be something like forty dollars a share So anyone who
buys at that eighteen dollars price or really any price
upto thirty thirty two thirty five something like that Well
they'll make a massive return for one day's work just
flipping their stock Tio you no longer term holders I
think about the real estate show where they flip houses
you know Well they have to do a whole lot
of work to flip a house on stocks are a
lot easier Well why do hot issues even happen Well
often banks purposely underprice i pose to quote pay the
street unquote for taking risk and buying that aipo handsomely
like they price it low Lots of people are going
to buy it have a low cost basis and remember
it fondly Well cos generally play along instead of selling
say thirty forty fifty percent of themselves to the public
in there i po well they only sell ten percent
and later on they'll sell more when the stock is
popped and traded and settled and has a buying public
and all the other good things that go with it
so and only a tiny amount of shares out there
trading even modest demand can drive prices to the sky
and this phenomenon happens Ah lot ebay snap facebook A
whole bunch of others essentially created hot issues by offering
very tiny fractions of ownership of themselves to the public
in there i po so that the enormous buyer interest
almost guarantees more demand than supply of the security being
sold and hot issues as you guess our great well 00:02:03.51 --> [endTime] until they're not
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