3a primary markets Flashcards
Sponsor listing agent?
Assess suitability for listing
Assess best method of bringing co. to market
Coordinates production of prospectus
Legal advisors?
Ensures relevant matters are in prospectus
Public relations?
To create positive perception of company
Accountants?
Validates financial statements in the prospectus
Corporate broker?
Interface between the company and the mkt
Advises the company on curent mkt conditions
Issuing house at IPO stage and ongoing
Underwriting meaning?
Where a bank guarantees the minimum level of proceeds on an issue
What is a lead manager?
Firm given responsibility to coordinate issuance of securities through a syndicate.
Generally the sponsor
Co-manager?
Appointed by the lead manager to assist in issuance
Issuing house?
Usually an investment bank
Corporate
Invited applications form the public at a slightly higher price than the issuing house had paid the issuing company through an offer document
Bookrunner?
A firm who is given the role to coordinate the overall level of investor demand
typically the lead manager
Co-lead manager?
Joint responsibility to coordinate issue of securities
Usually in a different geographical area
Purpose of underwriting?
Means of guaranteeing a minimum level of proceeds from a share issuance
Used in all situations where share issues are generating proceeds
Is there a limit on number of underwriters?
no
What does non-dilutive follow-on offering mean and give an example?
Shares brought to the market from issued share capital but not part of the free float
E.g. directors selling own shares to investors
Stabilisation?
Where a lead manager in an issue purchases stock in the secondary market to support the issue
What does dilutive follow-on offering mean?
When company’s board agrees to increase share float for the purpose of sellling more equity in the company
Open offer?
Offer open for exisiting shareholders to take up and buy the shares or not to buy
Offer for subscription
Company issues shares direct to the general public - not so common
Offer for sale
Similar to offer for subscription except a bank “issuing house” buys up the shares before offering them to the public - more common
Fixed price offer
Often at an offer price which is artificaly low to generate goodwill amongst purchases - encourage active secondary mkt
Tender offer
Investors make bids and issuing house then selects applications with highest bids
Placing meaning?
This is like an offer for sale apart from issuing house sells only to large institutional clients, typically on selective basis.
No need for prospectus here
For qualified invesotrs, not a public offer
Intermediaries offer
A placing made through issuing houses (brokers)
Introductions? When might this happen?
Company obtains listing without issuing new share capital
This is when company is aleady quoted on an overseas stock exchange and might seek to expand potential SH base on another exchange
Prices in placings vs. offer for sale?
Placing is cheaper than offer for sale because of fact that it is for qualified invesotrs - selective marketing technique.
Issuers are exempt from obligation to produce a prospectus
Conditions for listing - how many years of audited accounts?
3 years
Conditions for listing - share ownership for main market companies?
10% to the public
Listing rules - disclosure requirements
Price sensitive info
Dividends, director’s dealings, changes in registers
Financial info
Two types of bond issuers specifically in the US?
Municipal bonds (e.g. states/local authorities)
Agency bonds (e.g. govt sponsored agencies)
Why are municipal bonds attractive?
Because interest income is exempt from federal income tax and in many cases, state and local taxes
What is attraction of agency bonds?
They are backed by government, considered safe investments
Who issues UK govt gilts and what style?
DMO, competitive bid (auction) have to honour price
UK govt gilts - what is min GEMMS are required to bid?
> 1mn nominal
French and German bonds - how is this done?
govt auction, bid pricing system
US govt bond issues - how is this done
Tender style - single price auction
Done by the dept of treasury - FED
What are non-competitive bids, how does the process work?
WHen govts issue a smaller tranche of debt using a non-competitive process.
Non comp bids are allotted at the weighted avg. price of the accepted price bids.
How can debt capital be raised to fund developments in a business (3 ways)
Schedules programmes to borrow money than issue bonds
Shelf registration
Company issues MTNs in response ot client requests
What is shelf registration - how long does it last, where is it used?
Single registration covers mutliple issues
Up to 2 years
Typically in the US with medium-term notes (2-10 yrs to maturity)
What is a reverse enquiry?
When investors request the bond and company responds - i.e. they issue MTNs in response to client requests
Bond issue: pitching?
Investment bank interested in managing the issue makes a pitch to the issuer
Bond issue: indicative bid
Indicaiton given by investment bank to issuer regarding how much the bond issue may raise
Bond issue: mandate announcement
Announcement of banks given the mandate to manage the bond issue
Bond issue: credit rating
IB will try to obtain favourable credit rating for the issue from rating agency.
Success of the issue and interest rate required by investors depend on this credit rating
Bond issue: roadshow
Series of meetings with potential investors and brokers, conducted by ocmpany and its underwriter to market the issue
Who can take part in comeptitive bids?
Large investors
Only GEMMS can enter bids with the DMO
Min NV of 1mn and multiples of 1mn
If successful, pay the bid
Non-competitive bids - who can take part?
Give private investor opportunity to take part
No price bid
Bid in minimum of 1k lots, max of 500k
Pay the avg of successful competitive bids
Difference between tender vs. auction?
Auction: successful bidder (each) pays the price they bid
Tender: the successful bidders pay the lowest successful price
