Every industry has its jargon, but the world of finance has a particularly rich lexicon. To the uninitiated it can be pretty impenetrable, but fortunately the ifs Insights blog is here to help shed some light on some of the more unusual terms that you might encounter.
Nothing to do with silver spoons, this is in fact a reference to Mario Puzo’s mafia novel ‘The Godfather’, and the famous trilogy of films of the same name, directed by Francis Ford Coppola.
In one of the film's best-known scenes Don Vito Corleone (Marlon Brando) is visited by his godson, the famous singer Johnny Fontane (Al Martino). Fontane asks for Vito's help to secure a film role that will boost his fading career, and which he has previously been denied. Don Corleone tells Johnny: ""I'll make him an offer he can't refuse."" The studio head later wakes to find the severed head of his expensive racehorse in his bed.
Consequently a ‘Godfather offer’ is a tender offer so generous that the management of the company is unable to prevent shareholders from accepting – an offer that can’t be refused.
In the Arthurian Legend one Knight of the Round Table stands out from the rest as the epitome of chivalry, forever carrying out deeds derring do and rescuing damsels in distress: Lancelot, the original ‘knight in shining armour’.
Separated from his family at birth, he was unaware of his name, known only as the ‘White Knight’, until he freed a castle from the rule of a despotic lord. Upon his victory the villagers took him to a cemetery where he was shown a great slab of metal, inscribed with a message stating that only one knight could lift the slab, and that the name of this knight could be found beneath. Lancelot lifts the metal effortlessly, and learns his name for the first time.
In investment terms a ‘white knight’ is a friendly investor who ‘rescues’ a company from a hostile take-over bid by an investor who would seek to replace the Board of Directors or management team. These hostile investors are often known as ‘Black Knights’.
Lady Macbeth Strategy
Anyone who knows their Shakespeare will know that Lady Macbeth, wife to the eponymous Macbeth, is one of the most duplicitous characters in all of the bard’s plays. It is she who devises the dastardly plot to kill King Duncan and have her husband take the throne. She is ruthless and manipulative, and her plan rests upon an enormous betrayal: the couple welcome King Duncan into their house and then murder him in his sleep.
Lady Macbeth gives her name to a corporate takeover strategy in which one bidder poses as a ‘white knight’ before ‘betraying’ the company which is the object of the takeover and joining with unfriendly bidders.
The David Hasselhof Index and the Angelina Jolie Index
These two indexes are selections of stocks associated with The Hoff and Ms. Jolie, respectively. The idea is that these two celebrities are so popular that being associated with either of them means that a stock will outperform its rivals in the long run.
There’s a very old joke, similar to the sort favoured by Christmas cracker manufacturers and my father, which goes like this:
Q: Where does an 800-pound gorilla sit?
A: Where-ever he likes.
In business circles a ‘gorilla’ is a company that is so large that it dominates its market place, and can act more or less as it pleases. Although these companies do not always have a monopoly, their size can mean that they are able to act as if they do.
Hat tip: Investopedia.com