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21 Cards in this Set
- Front
- Back
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Major types of capital raising |
Stock offerings Bond offerings Loan syndications |
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Performed by the investment bank's Capital Markets group |
The Capital Markets group has various subgroups that specialize in specific types of offerings |
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Sources of capital |
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Individual investors |
Small investors Wealthy individuals |
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Institutions |
Mutual funds Insurance companies Pension funds Hedge funds |
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Governments |
Sovereign wealth funds Government pension funds |
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What do investors want? |
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Equity investors |
Dividends |
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Earnings growth |
Stocks have more upside than downside |
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Debt investors |
Predictable income |
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Low default risk |
Bonds have more downside than upside |
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What do companies want? |
Low cost (interest dividends, fees) Flexibility (as few restrictions as possible) Control (don't want to share ownership, voting rights and valuation upside) Risk minimization |
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Matching the Financing and the Business
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Lifespan |
Match the term of the financing to the life of the assets being financed |
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Currencies |
Issue debt in currencies that match the currencies in which the business operates |
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Business cycles |
Try to avoid having maturities in cyclical downturns |
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Risk (don't finance high-risk businesses with capital that increases risk) |
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Risky companies should avoid large near term cash payment requirements |
Interest Dividends |
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Key considerations |
What is the business' need for capital? What do the company's mangers want? Raise money when it is available, not when you are desperate |
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How risky or cyclical is the business? |
Don't let the financing increase the risk |
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What is occurring in the markets? |
What do investors want? |
