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36 Cards in this Set
- Front
- Back
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Primary offering |
Where securities are issues for the first time by companies looking to raise capital. IPO |
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Secondary/follow on offering |
Company comes back to the market to raise more money. |
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Listing process |
Decision > preparation of prospectus > sale of securities |
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Pre IPO Specialists |
Sponsor Reporting accountants Legal advisors Public relations consultant Corporate broker |
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Underwriting Vs best efforts |
Underwriting - insurance policy, guarentee to buy unsold shares at set price
Best efforts - no guarentee |
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Listing securities - pricing |
1) fixed price offer - one price set for all 2) tender offer - tenders are invited from investors, with all successful tenderest paying a common strike price
In both cases everyone pays the same strike price |
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Four methods for issuing shares |
-offer for subscription -offer for sale -placing
-introductions - not raising funds just getting a listing |
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Stags |
Buy shares via IPOs and then look to seek quickly to make money from shares being issued cheaply. AKA Flipping |
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Stags |
Buy shares via IPOs and then look to seek quickly to make money from shares being issued cheaply. AKA Flipping |
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Bonus issues |
For subsequent share issues AKA capitalization or scrip issue Shareholders receive free new shares pro rata to existing No Econ impact Will reduce share price - making shares more marketable Affects ratios: EPS, BVPS not p/e or p/b |
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Rights issues What can do you with the rights? |
Buy new shares @ reduced price > costX Sell rights issues @ issue price > incomeX Sell part of rights issue to finance purchase of extra shares > 'swallowing the tail' |
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Bonus issues |
For subsequent share issues AKA capitalization or scrip issue Shareholders receive free new shares pro rata to existing No Econ impact Will reduce share price - making shares more marketable Affects ratios: EPS, BVPS not p/e or p/b |
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Rights issues What can do you with the rights? |
Buy new shares @ reduced price > costX Sell rights issues @ issue price > incomeX Sell part of rights issue to finance purchase of extra shares > 'swallowing the tail' |
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Rights issues Max subscription at nil cost |
No. of rights to sell = No. of rights x subscription price / ex-rights price |
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Share buybacks |
Adjustment in debt/equity balance Creditor protection given - buffer needs to be maintained Shareholder approval AGM Mechanism of buybacks: -block trades -accelerated book build -bought deals |
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Shelf registration |
Used when issuing multiple issues of debt in order to meet cash flow/liab needs Shelf registration removed need to re register each issue. Used most in medium term note markets Allowed for: 12 months Publication of next set of accounts |
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Bond allocation |
Competitive auction method - pay what you bid Tender - all pay lowest successful bid -reverse enquiry |
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Bond allocation |
Competitive auction method - pay what you bid Tender - all pay lowest successful bid -reverse enquiry |
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Bond pricing (corp bonds) |
With reference to spread over the benchmark which could be: LIBOR swap spreads Government bonds |
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Stake building 3 types |
Strategic Acquisitive Legal control |
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Stake building 3 types |
Strategic Acquisitive Legal control |
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Strategic stakes |
Some control over key supplier |
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Stake building 3 types |
Strategic Acquisitive Legal control |
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Strategic stakes |
Some control over key supplier |
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Acquisitive stakes |
Gaining some level of control over a company Vertical or horizontal integration |
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Stake building 3 types |
Strategic Acquisitive Legal control |
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Strategic stakes |
Some control over key supplier |
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Acquisitive stakes |
Gaining some level of control over a company Vertical or horizontal integration |
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Legal control |
Achieved where > 50% is purchased Take over panel effective control >= 30% |
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Raising finance to fund takeovers |
Debt Secondary issue of equity -pref shares -rights issue /open offer Convertible bonds/pref shares |
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Raising finance to fund takeovers |
Debt Secondary issue of equity -pref shares -rights issue /open offer Convertible bonds/pref shares |
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Issues with raising finance |
New voting shares - solution Cost of servicing capital - interest or dividends |
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Steps to work out value of rights nil paid |
1) work out TERP 2) value of rights nil paid 3) amount needed to sell to buy @ nil cost |
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How to work out TERP |
Where rights are X to Y Before Y shs @ current price = ADD X shares @ subscription price AFTER X + Y for = total amount
Divide the total amount by the number of shares you now have |
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Value of rights nil paid |
TERP - subscription price |
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Swallowing the tail / how many rights shares to sell to be able to buy at nil cost |
To sell: No of rights (amount of shares / Y i.e. If rights was 1 to 4, divide by 4) X subscription price/TERP
To buy: Take answer from above and subtract it from the total amount left allocated rights |
