Chapter 5 - Financial Markets Flashcards
Key benefits of admission to a public market
Providing access to capital for growth
Raise finance
Broadening the shareholder base
Placing objective value on the company
Encourage employee commitment through stock incentive schemes
What must a company submit for approval for a stock market listing?
They must receive UKLA approval AND a separate application to the LSE
What are the 3 types of advisors for a public listing?
Sponsor - to ensure the company is suitable for listing
Corporate broker - advising on market conditions & investor demand
Reporting accountant - review the accounts to ensure company is IPO ready and undertake financial due diligence
What are the two types of stock market listing? And a key difference
Premium Listing - Must meet standards that exceed those set out in EU law, only available to closed ended vehicles and sovereigns
Standard Listing - Meets less strict requirements and is for small and medium companies
What are the full listing entry requirements for a new company listing?
Market value must be at least £30m
At least 10% of shares must be made freely available to the public
No one shareholder can hold 30% of the ordinary shares
Must have 3 years of audited accounts
Any subsequent issue of ordinary shares must be made to existing shareholders first
3 types of IPO
Introductions - Shares introduced to an exchange
Placings - popular for small companies, offers shares directly to institutional investors
Offers for sale - Most common, issues shares to issuing house
What are GEMM’s?
GEMM = Gilt Edged Market Maker
These are the main gilt market participants, are expected to play an active role in the issuance and distributions of UK gov debt
3 benefits of being a GEMM?
The only firms who can bid directly to the DMO
DMO will only deal with GEMM’s in the secondary market
Have the right to strip and reconstitute gilts through CREST
What are the three types of bond seniority?
Senior - Highest claim of borrowing in the event of liquidation
Subordinated - Ranks below senior, but receive higher yield than Senior
Mezzanine - Most risky, not all companies issue this kind of debt, highest yield though
What is an “indicative bid”?
When banks, on behalf of the issuing company, will indicate the price at which they believe they can make a successful issue of a bond
What are medium term notes?
MTN’s are used to close the funding gap between commercial paper and long-dated bonds, essentially used as medium term borrowing
In relation to a share offering, what is the ‘strike price’?
In an offer by tender, any offer on or above this price is allotted in full
