A watch list is a collection of information on securities maintained by a brokerage, stock exchange, or regulatory agency based on factors that require monitoring. Companies may be placed on the watch list due to acquisition potential, new stock issuance, or irregular activity.
The watch list is a collection of information on various titles. Often a brokerage, stock exchange, or some sort of government regulatory agency maintains this list of securities. Securities are included in the watch list based on several factors that cause the broker or exchange to believe that the issuing firm or entity should be monitored for some reason.
One of the reasons a company and its stock may be placed on a watchlist is due to the existence of circumstances that make the company ripe for an acquisition. Brokers who have clients who currently own shares in the company will want to monitor for any signs that corporate raiders are attempting to buy available shares of the stock or employ other means to gain control of the company, such as a buyout. Placing the company on the brokerage watch list helps ensure that the broker can alert investors to relevant events as they occur and possibly protect their clients from realizing a loss on their investment.
Along with tender offers, companies that are looking into issuing new stocks or shares may also find their way onto a watch list or two. Regulatory agencies will monitor the activity closely to ensure that the matter is conducted in accordance with applicable laws and regulations. Brokers will want to know the status so they can advise their clients on the status of the new issue and perhaps receive orders to execute a buy once the stock hits the market. A stock marketer might also be interested in the details of the release and the impact the new securities might have on market conditions.
Irregular activity can also cause a company’s stock to be placed on a watch list. When the stock appears to be performing out of line with current market trends, brokers, exchanges and regulatory agencies will want to monitor the activity closely to understand what is actually happening. Often, the erratic performance of a given security foreshadows some changes in the market that may soon spread. When this is the case, brokers and exchanges that have observed the impact on a company’s stock will be in a better position to anticipate the effect similar circumstances will have on other stocks and securities.
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