Love around Wall Street
By Andrew Beattie

Imagine traders walking hand in hand with buy and hold investors, analysts snuggling with economists, bulls and bears living in perfect harmony. Suddenly, the world is a beautiful place to live. It’s the month of February and that means it's time for love. In keeping with the romance in the air, let's look at some love-related terms that would warm even the coldest Wall Street heart. Sweetheart Deal It's not quite two corporations at a diner table, sipping the same milkshake through separate straws while holding hands, but the sweetheart deal may be the Wall Street equivalent. In a sweetheart deal, one company offers very attractive terms and conditions to another company or individual. It can be an acquisition or an attempt to lure in a new CEO. A sweetheart deal can be a bad thing for shareholders because, if their company is being taken over, management may receive benefits (for example, buyout packages) while shareholders take a loss. If a sweetheart deal is obviously unethical and not in the interests of shareholders, legal action can be taken. Risk Lover If you spent your formative years as your neighborhood's BMX daredevil, you may be a risk lover. Risk lovers in the investment world don’t necessarily try to jump the school bus during recess, but they do make investments whose outcomes are uncertain. This type of investor doesn’t love risk just for its own sake, but because the risk/return tradeoff dictates that with a greater exposure to risk comes a greater possibility of payout. This means that the return is huge when it happens, but the chance of it happening may be slimmer. The risk lover’s opposite is the investor who is risk averse--he or she prefers investments with a more guaranteed payout, even if it's smaller. Sensitivity Analysis No, we're not talking about whether or not you write poetry and bring your sweetheart flowers and chocolates "just because." Sensitivity analysis is a technique used to determine how a projected outcome is affected if one of the key predictions proves false. For example, you might try to determine how sensitive a movie’s box office profits are to lower-than-expected numbers during its opening weekend. Friendly Hands Friendly hands are the fear of every father watching his daughter head out on her first date. But in the investing world, companies view friendly hands in a much more favorable light. This term refers to investors who buy a stock at the IPO and hold onto it for the long term, looking for long-term rewards rather than short-term gain. Friendly hands help the company create a sense of stability right off the bat--angel investors usually double as friendly hands. Love Money Love money is the money that comes from your angel investors, who usually are your friends and family. They may give you money as a result of the strength of their love for you, rather than the strength of your business plan. This type of money is rare and far from endless. So if you get it, be thankful. Teddy Bear Hug A teddy bear hug can occur when a takeover company warns its target company in advance about the offer it's about to make on its shares. If the price per share is extremely generous, and if the target company accepts, the deal is referred to as a bear hug. The target company, however, may turn down the offer in hopes of a higher price. If the acquiring company is a teddy bear, it will usually give in and raise the value of the offer. The idea is that the acquiring firm is soft like a teddy bear and wants to make everyone happy. That's it for our look at the warm and fuzzy world of Wall Street. Have a happy Valentine's Day.

By Andrew Beattie