Management Buy-Out (MBO)

A transaction in which the current operating managers of an existing company and the investors purchase that company or a business activity or range of products of that company.

Management Fee

Compensation for the management of a venture fund’s activities, paid from the fund to the general partner or investment advisor. This compensation generally includes an annual management fee.

Managing Underwriters

The underwriters whose names appear on the cover page of the prospectus, who assist the company in preparation of the prospectus and road show, and organize the syndicate of underwriters to sell the securities. See ‘Lead Underwriter.’

Manipulation

The purchase or sale of securities designed to provoke a false sense of the trading activity in the security. Market manipulation is illegal in most jurisdictions.

Margin

Using money borrowed from a broker/dealer, bank, or other source to purchase securities, also called ‘buying on margin.’ Also, the amount of equity required for an investment in securities purchased on credit. Also, the face value of a loan minus the value of the pledged collateral.

Market Authority

Governing entity of a stock exchange or trading system responsible for market regulation, approval of members, admission to and cancellation of listing, and operation of the trading system.

Market Capitalization or Market Cap

The number of shares outstanding multiplied by the market price of the stock. Market capitalization is a common standard for describing the worth of a public company.

Market Maker

Brokerage and securities firms that are required by the rules of a stock market or exchange to both buy and sell securities of a quoted company, for which they act as market maker, at bid and offer prices that they quote.

Market Maker Spread

The difference between the price at which a market maker is willing to buy a security and the price at which it is willing to sell it.

Market Overhang

The depressive effect on the market price of a publicly traded security when the market knows that there are a substantial number of shares that are freely tradable and there is reason to believe the holders may sell in the foreseeable future.

Market Segmentation

A marketing technique that targets a group of customers with specific characteristics.

Market Standoff Agreement

Similar to Lock-Up Agreements whereby parties agree not to sell company stock for a number of predetermined days after a stock offering by the company.

Market-Share Weighted Index

A stock index in which each stock affects the index in proportion to its number of shares outstanding.

Material Information

Information that a reasonable investor would consider an important part of the total mix of information required when deciding to buy or sell a security, to vote for or against a director or merger, or when making some other investment decision.

Mature Funds

Funds that have been in existence for over two years.

Median IRR

The value appearing at the mid-point of a table ranking funds by IRR in descending order.

Memorandum

See ‘Private Placement Memorandum.’

Merchant Bank

(USA) A firm investing its own funds for its own account, often acquiring a controlling interest in a company. This term is used interchangeably with the term ‘investment bank’ in the UK. See ‘Investment Bank or Banker.’

Mezzanine Capital/Fund

Venture capital financing in connection with a company’s execution phase as it begins production and marketing following the start-up phase. A ‘Mezzanine Fund’ is a venture capital fund focusing on mezzanine financing. See ‘Development Capital/Fund’ and ‘Pre-IPO Capital/Fund.’

Mezzanine Financing or Round

A financing round in venture capital-backed companies occurring after the company has completed its product development and after it is an operating company, but before the company is ready for a public offering or acquisition.

Mid-Market Value

The average of bid and offer price.

Missing the Market

Failure to time an offering of securities to take advantage of a period of higher than normal demand for securities. Missing the Market often results in an offering being priced lower than if it were affected during the period of higher market demand.

Multiple Preference

When an investor receives a multiple of the original investment upon an exit or liquidation, such as a liquidation preference of two or three times the original issue price of the security held by the investor.

Multiples or Relative Valuation

An estimate of the value of an asset by looking at the pricing of “comparable” assets relative to a variable such as earnings, cash flows, book value or sales. See ‘P/E Ratio.’

Mutual Fund

An open-end fund that may sell as many shares as investors demand. As money flows in, the fund grows. If money flows out of the fund, the number of the fund’s outstanding shares drops. Open-end funds are sometimes closed to new investors, but existing investors can still continue to invest money in the fund. Compare ‘Closed-End Fund.’