Expert Chaslau Koniukh
  • Companies
  • Global investment
  • Investors
  • Terminology
  • Economy
  • Stock Market
  • World exchanges
  • Tech and Marketing
laddering
Market terminology

Laddering: essence of tactics and use for investment and IPO

04.03.2021
2 min read

In what cases is the laddering used

Laddering comes from the English word, which means ladder. Its scope of application is market research, investments and anything related to illegal transactions in the IPO process.
This tactic involves investing in financial instruments, which have different maturity dates. This principle resembles a ladder, from which the name comes. Investments are made upward, where each new investment has a longer term than the previous one..
It’s easier to understand the process by example. The simplest of them is the purchase of securities that belong to the same issuer, but they have different periods of maturity. By buying government bonds, which expire in 2020, 2021, 2022, an investor builds such a ladder. Such a strategy makes it possible to diversify the capital, but not to the full extent, as the investment object is only one. However, this option provides an opportunity to reduce damage if the interest rate changes. For example, if it decreases in 2021, the investor can make a profit for 2020, where the interest rate was higher. Later, he can invest this capital in more profitable assets, and profit can be made from bonds with a late maturity.
Another feature of laddering is the gradual withdrawal of funds, which can then be used for reinvestments, property acquisition and other plans.
This tactic is also used for an IPO. A ladder here is formed by raising the value for a portion of the shares when a public offering is made. In this case, the investor first needs to buy an overpriced stake and then a large stake at a lower price. Laddering in this case can be used for fraudulent purposes by insiders. They buy shares at an undervalue in order to sell them several times more expensively.

laddering

These actions are considered criminal and are prosecuted worldwide. However, it is very difficult to trace such machinations in most cases, as underwriters very often negotiate with potential buyers and everything goes without attracting extra people. And as a result, all parties are satisfied.
Underwriter is considered an intermediary between the company and the issuer in the procedure of initial public offering on the stock exchange. It is advantageous for large investors to act according to such a scheme, because having overpaid for a small number of shares, you can buy a much larger package at a favorable price. In this case, insiders from the transaction receive a good commission on the difference in the value of securities, and are interested in this type of branding.

Tags: Market terminology
0
Previous Post Germany supports construction of the Nord Stream-2 gas pipeline Next Post Experts from Sberbank Investment Research: Will there be a drop in the dollar rate?

You Might Also Like

junk bonds
Market terminology
Junk bonds: characteristics of securities with low credit ratings
02.02.2021
buyback
Market terminology
Buyback: tasks and goals of share buyback
12.11.2022
Perpetual bonds
Market terminology
Why perpetual bonds are profitable to invest in
22.07.2021
prop trading
Market terminology
What is prop trading?
12.02.2021
dow jones averages
Market terminology
What is the Dow Jones averages index
17.06.2020
lazy portfolio
Market terminology
Lazy portfolio: a way of investing that does not require deep knowledge
08.06.2023

Recent Posts

  • 1Margarete Steiff teddy bear
    Margarete Steiff was the seamstress who gave the world Teddy Bear
    29.11.2023
  • 2Huawei
    History of the Chinese corporation Huawei and its achievements
    27.11.2023
  • 3order block
    Order block and its use for stock exchange trading
    25.11.2023
  • 4Bahrain and the UK
    Bahrain and the UK intensify cooperation
    23.11.2023
  • 5Genesis MedTech IPO
    Genesis MedTech plans to float its shares on the Hong Kong Stock Exchange
    21.11.2023

Popular Posts

  • Analysts: Egypt’s economy to continue falling in 2023
  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Field of activity of the American Monsanto Company Corporation
  • Skolkovo analysts: the Russian energy market is suffering losses

Social media

Editor's Picks

Chaslau Koniukh
Analytics

American bankers from JPMorgan and Goldman Sachs advise to invest in gold: review by Chaslau Koniukh.

Spokesperson
17.08.2020
Expert Chaslau Koniukh
Analytics

Chaslau Koniukh on the analysts’ opinion on the key stake size change soon

Spokesperson
18.06.2020
expert Chaslau Koniukh
Analytics

Chaslau Koniukh: Internet trade market in Russia may reach 2.78 trillion rubles.

Spokesperson
30.05.2020
Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh
Analytics

Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh

Spokesperson
16.05.2020

Latest Posts

India's steel imports from China
India’s steel imports from China hurt local producers
01.12.2023
Margarete Steiff teddy bear
Margarete Steiff was the seamstress who gave the world Teddy Bear
29.11.2023
Huawei
History of the Chinese corporation Huawei and its achievements
27.11.2023

Chaslau Koniukh

Expert Chaslau Koniukh

Chaslau Koniukh – an expert in marketing and project management, IT consulting, international investments, investor, financial analyst. A commodity trader, private consultant, entrepreneur, lecturer, author of several articles on the stock market.

Popular Posts

  • Analysts: Egypt’s economy to continue falling in 2023
  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Field of activity of the American Monsanto Company Corporation
  • Skolkovo analysts: the Russian energy market is suffering losses
  • National Stock Exchange of India: an inside look
Expert Chaslau Koniukh
  • Facebook
  • Twitter
  • Instagram
  • Biography

Chaslau Koniukh – an expert in marketing and project management, international investments, financial analyst.

Social media

Menu

  • Biography
  • Companies and corporations
  • Global investment
  • Investors and Entrepreneurs
  • Economy
  • Market terminology
  • Stock Market
  • World exchanges
  • Tech and Marketing
  • Analytics