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Reference Library




A short-term negotiable debt security or promise to pay.

Paper Profit

A profit on a security which has not been taken. Paper profits become realized profits only when the security is sold. A paper loss is the opposite to this. An example of a paper profit would be the purchase of ABC at $25. It is now trading at $27, so the paper profit is $2 per share.

Par Value

The stated face value of a bond or, in the case of stock, an amount assigned by the company's charter and expressed as a dollar amount per share. Par value of common stock usually has no relationship to the current market value and so no par value stock is issued. Par value of preferred stock is significant, however, as it indicates the dollar amount of assets each preferred share would be entitled to in the event of liquidation of the company.

Pari Passu

This means "in equal proportion." It usually refers to equally ranking issues of a company's preferred shares.

Participating Feature

This applies to some preferred stocks which, in addition to a fixed rate of dividend, also share in the earnings of the company and may receive additional dividends over and above their specified dividend rate.

Penny Stocks

Low-priced speculative issues of stock selling at less than $1.00 a share.

Piggy Back Warrants

Some warrants entitle the holder to acquire shares plus additional warrants at a later date. The warrants that are received upon the exercise of the initial warrants are known as piggy back warrants.


Points apply to security prices. In the case of shares, one point indicates $1.00 per share. For bonds and debentures, one point means 1% of par value. Par value is almost universally 100 for bonds.

Poison Pill

A corporate provision to combat hostile takeovers. When triggered, the poison pill allows shareholders to acquire additional shares at below market price, thereby increasing the number of shares outstanding and making the takeover prohibitively expensive. Such plans are relatively new in corporate Canada and are the subject of some controversy regarding whom they are designed to protect.

Pooling of Interest

This occurs when a company issues treasury shares for the assets of another company so that the latter becomes a division or subsidiary of the acquiring company. Subsequent accounts of the parent company are set up to include the retained earnings and assets at book value (subject to certain adjustments) of the acquired company.


The entire combination of securities or investments an individual or institution holds. A portfolio can contain a variety of government and company bonds, preferred and common stocks from different businesses and other types of securities and assets.

Preferred Stocks or Shares

A class of stock that entitles the owners to a stated dollar value per share in liquidation (paid after bondholders) and a fixed dividend paid ahead of the company's common shares. Preferred shares usually only have voting rights when a stated number of dividends have been missed. Preferred shares are generally considered income investments.


1. The amount by which a bond or preferred stock may sell above its par value. In the case of a new issue of bonds or stocks, the premium is the amount the market price rises over the original selling price. 2. The premium can also refer to the part of the redemption price of a bond or preferred stock that is in excess of face value, par value or market price. 3. When referring to options, the premium is the price paid by the buyer of an option contract to a seller.

Price-Earnings Ratio or PE Multiple

This is a common stock's current market price divided by annual per share earnings. This ratio is a short way of saying that a share is selling at so many times its actual or anticipated annual earnings. A price-earnings ratio is one tool used to compare one share to another.

Primary Offering or Primary Market

The original sale of any new issue of a company's securities.

Prime Rate

The interest rate chartered banks charge to their most credit-worthy borrowers.


A dealer buying or selling securities for his or her own account. The term "principal" can also refer to a person's capital or to the face value of a bond.

Prior Preferred

A preferred stock which in the liquidation of the issuing company would rank ahead of other classes of preferred shares as to asset and dividend entitlement.

Private Placements

The underwriting of a security and its sale to a few buyers, usually institutional, in large amounts. No formal prospectus is needed to be prepared in this instance as the buyers are considered to be sophisticated.

Pro Forma

When a new issue is being planned for distribution, the corporation issuing the security must tell the suppliers of the new capital how they intend on spending the money received from the sale of the securities. The corporation publishes a pro forma balance sheet which integrates the new pool of money into their current operation. This shows the shareholders how the corporation would have spent the money if they had it on the day the pro forma balance sheet was created.

Pro Rata

This means "in proportion to." For example, a dividend is a pro rata payment because the amount of dividend each shareholder receives is in proportion to the number of shares he or she owns.

Profit Taking

Selling securities to take a profit. The process of converting paper profits into cash.

Program Trading

A sophisticated computerized trading strategy whereby a portfolio manager attempts to earn a profit from the price spreads between a portfolio of equities similar or identical to those underlying a designated stock index, e.g. the Standard & Poor's 500 Index, and the price at which futures contracts (or their options) on the index trade in financial futures markets.


A legal document which describes the securities being offered for sale to the public. These documents usually disclose pertinent information concerning the company's operations, securities, management and purpose of the offering. The prospectus must be prepared in accordance with requirements of the applicable provincial securities commissions.


Written authorization given by a shareholder to someone else, who does not necessarily need to be a shareholder, to represent him or her and vote at a shareholders' meeting.

Prudent Portfolio Rule

In some provinces the law requires that a trustee may only invest in a security if it is one which an ordinary prudent person would buy if he or she were investing for the benefit of other people for whom he or she felt morally bound to provide. Some provinces apply both this rule and the rule under legal investment, where a list of specific securities has been designated.

Purchase Fund

A fund set up by a company to retire, through purchases in the market, a specified amount of its outstanding preferred shares or debt. Purchases are made at or below a stipulated price.


During a stock split, a push-out occurs when new shares are forwarded directly to the registered holders of old share certificates, without the holders having to surrender these old shares. Both old and new shares have equal value.

Put Options

An option which gives the holder the right, but not the obligation, to sell a fixed amount of a certain stock at a specified price within a specified time. Puts are purchased by those who think a stock may go down in price.

The information contained herein is considered accurate at the time of posting. CIBC and CIBC World Markets Inc. reserve the right to change any of it without prior notice. It is for general information purposes only.

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