What is the name of inverse of synergy? (finance)
"You could call it ""multiple streams of income"" a la Robert Allen and others. Or you could call it ""Do once, sell many"" or something like that." I'd probably call it an intangible or indirect benefit. Not sure what the trade term is.
"It does depend, but in the effort to be efficient we usually just add back Depreciation, Amortization, and Stock Based Comp.  [Although adding back SBC is hotly debated](https://www.wallstreetprep.com/blog/stock-based-compensation-treatment-dcf-almost-always-wrong/), we usually still add it back at my firm.  Keep in mind I'm in M&amp;A, so we don't really concern ourselves with creating the ""purest"" valuation...  * EBIAT * Add Depreciation * Add Amort * Add SBC * Subtract Capex * Add the decrease in NWC * Subtract the increase in NWC * = FCFF" "Thanks for pointing out [the study](http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1748851). It's a slightly different cause than what I was describing when I posted this. Specifically, they show an effect not when the names get confused, but rather when the name similarity simply brings more attention to the stock. I was surprised nobody mentioned that in response to my post.  But also interesting is that they had to control for simple confusion between stock symbols, which implies that ticker confusion has a known effect. So I dug into research on that and quickly found [this study](http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2010-Aarhus/EFMA2010_0161_fullpaper.pdf) found ""a high positive correlation between returns on two matching stocks with similar ticker symbols""." Credit products and securitized debt.  Credit/debt is the flip side of equity but has less volatility. In today's investing environment people are not looking for a big return as much as less risk with a modest return. Another trend I think you will see is the disappearance of the wall between interest rate products/fixed income and credit products. "**Modern portfolio theory**  Modern portfolio theory (MPT), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk, defined as variance. Its key insight is that an asset's risk and return should not be assessed by itself, but by how it contributes to a portfolio's overall risk and return.  Economist Harry Markowitz introduced MPT in a 1952 essay, for which he was later awarded a Nobel Prize in economics.  ***  **Option (finance)**  In finance, an option is a contract which gives the buyer (the owner or holder of the option) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specific strike price on a specified date, depending on the form of the option. The strike price may be set by reference to the spot price (market price) of the underlying security or commodity on the day an option is taken out, or it may be fixed at a discount in a premium. The seller has the corresponding obligation to fulfill the transaction—to sell or buy—if the buyer (owner) ""exercises"" the option. An option that conveys to the owner the right to buy at a specific price is referred to as a call; an option that conveys the right of the owner to sell at a specific price is referred to as a put.  ***  ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&amp;message=Excludeme&amp;subject=Excludeme) ^| [^Exclude ^from ^subreddit](https://np.reddit.com/r/finance/about/banned) ^| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index) ^| [^Source](https://github.com/kittenswolf/WikiTextBot)   ^] ^Downvote ^to ^remove ^| ^v0.27" I was looking at NAT and NAO, NAT owns 20% of NAO.  They trade opposite each other on the price of oil, low is good for NAT, bad for NAO.  In bad times the other company's stock would probably rise, so they could trim excess shares to keep a stable monetary holding.  This would create cash in bad times, in good times they could buy more, creating a floor as well for the other. Empirial evidence for the second scenario: Can banks individually create money out of nothing? — The theories and the empirical evidence. Excerpt: It was examined whether in the process of making money available to   the borrower the bank transfers these funds from other accounts   (within or outside the bank). In the process of making loaned money   available in the borrower's bank account, it was found that the bank   did not transfer the money away from other internal or external   accounts, resulting in a rejection of both the fractional reserve   theory and the financial intermediation theory. Instead, it was found   that the bank newly ‘invented’ the funds by crediting the borrower's   account with a deposit, although no such deposit had taken place. This   is in line with the claims of the credit creation theory. Thus it can now be said with confidence for the first time – possibly   in the 5000 years' history of banking - that it has been empirically   demonstrated that each individual bank creates credit and money out of   nothing, when it extends what is called a ‘bank loan’. The bank does   not loan any existing money, but instead creates new money. The money   supply is created as ‘fairy dust’ produced by the banks out of thin   air. For the case of spinoffs it reflects the market as activities as the specific steps that have to be followed take place. For example the spinoff of Leidos from SAIC in 2013. (I picked this one becasue I knew some of the details) On September 9, 2013, the Board of Directors of SAIC, Inc.(Ticker   Symbol (NYSE):SAI) approved the following:  The separation of its technical, engineering and enterprise information technology services business through the distribution of   shares of SAIC  Gemini, Inc. to stockholders.  Each stockholder of   record of SAIC, Inc. as of  September 19, 2013 (Record Date) will   receive one (1) share of SAIC Gemini, Inc. common stock for every   seven (7) shares of SAIC, Inc. common stock  held by such stockholder   as of the Record Date.   This distribution will be effective after   market close on September 27, 2013 (Distribution Date).  After the   Distribution Date, SAIC Gemini, Inc. will be renamed Science   Applications International Corporation (New SAIC). A one (1) for four (4) reverse stock split of the SAIC, Inc. common stock effective as of Distribution Date. After the Distribution Date,   SAIC, Inc. will be renamed Leidos Holdings, Inc. (Leidos). Q 11: What are the different trading markets that may occur between   Record Date and Distribution Date? A: Beginning two days prior to the Record Date of September 19, 2013   through the Distribution Date on September 27, 2013, there may be   three different trading markets available with respect to SAIC, Inc.   and the separation. Stock Ticker – SAI (Regular Way Trading with Due Bills): Shares of SAI common stock that trade on the regular-way market will trade with   an entitlement to shares of the New SAIC common stock distributed on   the Distribution Date.  Purchasers in this market are purchasing both   the shares of Leidos and New SAIC common stock. Form of Stock Ticker –SAIC (When Issued Trading): Shares of New SAIC common stock may be traded on a “when-issued” basis.  These   transactions are made conditionally because the security has been   authorized, but not yet issued.  Purchasers in this market are only   purchasing the shares of  New SAIC common stock distributed on the   Distribution Date. Form of Stock Ticker – LDOS (Ex-Distribution Trading): Shares that trade on the ex-distribution market will trade without an entitlement   to shares of New SAIC common stock distributed on the Distribution   Date.  Purchasers in this market are only purchasing the shares of   Leidos common stock. So the stock price for New SAIC starts a few days before the record date of 19 September 2013, while LDOS (new name for the old SAIC) goes back much earlier. But the company didn't split until after the close of business on 27 September 2013. http://investors.saic.com/sites/saic.investorhq.businesswire.com/files/doc_library/file/GeneralStockholder-QuestionsandAnswers.pdf "In a way yes but I doubt you'd want that. A ""Stop-Limit"" order has both stop and limit components to it but I doubt this gives you what you want. In your example, if the stock falls to $1/share then the limit order of $3/share would be triggered but this isn't quite what I'd think you'd want to see. I'd suggest considering having 2 orders: A stop order to limit losses and a limit order to sell that are separate rather than fusing them together that likely isn't going to work." That's pretty typical for introductory problems.  It's leading you into an NPV question.  They're keeping the cash flows the same to illustrate the time value of money to show you that even though the free cash flow is the same in year 1 and year 4 or whatever when you discount it to present value today's stream is worth more than tomorrow's Upstream is into businesses that supply the original business; downstream is into businesses that make use of the original product.  So in that description, what they are saying is that the original business received products from plantations and sent products to manufacturing. This is also called vertical integration.  Meaning that they are diversifying along their supply chain so that they control more of it.  This is in contrast with horizontal integration, where they move into new products that either compete with the existing products or which are entirely separate.   In general, the upside of vertical integration is that a company is less reliant on suppliers (and intermediate consumers) and has more control over its supply chain.  The downside is that they have less opportunity to partner with other companies in the same supply chain, as they compete with them.  Some companies are better at managing to do both.  For example, Amazon.com has integrated fulfillment and sales.  But partners can still do their own fulfillment and/or sales, choosing how much to send out to Amazon.   If you are investing in individual stocks, integrated companies can be problematic in that they cut across diversification areas.  So they can be harder to balance with other stocks.  You can either buy plantations, transport, and manufacturing together or not buy at all.  If your investment strategy says to increase plantations and reduce manufacturing, this can be difficult to implement with an integrated company.  Of course, everyone else has the same problem, which can lead to integrated companies being undervalued.  So they may be an opportunity as a value stock. Need help with a finance problem I'm currently facing in my business.  My company might be going through an acquisition and I need to understand how the dilution works out for shareholders.  They currently have large shareholder loans (debt), and will be converting to equity pre-transaction.  For this case, if the original company value = $1 MM and the SHL value = $1 MM, I'm assuming that'd dilute equity by 50% for all shareholders if converted to equity at original company value.  Correct?  However, what if the $1 MM in shareholder loans were converted at the market value of the company, say $4 MM?    I might be confusing myself, but just want to confirm.. thanks! Sure let's say we're starting with the equity value of a public company. Fully diluted shares times market price. We add debt and subtract all cash to give us enterprise value. Calculate a multiple on that. Look what we did up there, we subtracted out all cash. The DCF approach assumes we have an operating level of cash when it calculates a value. You're saying that the DCF spits out an enterprise value. It cannot be an enterprise value if the DCF approach assumes we hold cash. We would have to subtract out an operating level of cash from the DCF concluded value to compare it apples to apples to the cashless enterprise values we derived from the market approach multiples. I guess I wasn't clear. I want to modestly leverage (3-4x) my portfolio using options. I believe long deep-in-the-money calls would be the best way to do this? (Let me know if not.)  It's important to me that the covariance matrix from the equity portfolio scales up but doesn't fundamentally change. (I liken it to systemic change as opposed to idiosyncratic change.)   This is what I was thinking:  * For the same expiry date, find each positions lowest lambda. * Match all option to the the highest of the lowest lambda. * Adjust number of contracts to compensate for higher leverage.  I don't think this will work because if I matched the lowest lambda of options on bond etfs to my equity options they would be out-of-the-money.  By the way, thanks for your time. "The complete opposite of ""sunk cost"" is the term ""unrealized gain""; until you sell it, then it is a ""realized gain"". There is also a term ""paper profit"" to point out the ephemeral nature of some of these unrealized gains." It's a good answer. I was alluding to cryptocurrency such as bitcoin which was a pretty genius invention (blockchain and mining) to solve the honesty problem (counterparty risk) you outlined when there's no trusted middleman to help keep people honest. Sounds like a dodgy cat though!