Chapter 6 - Corpy Actions & Share Captial (7%) Flashcards
What is a bullet payment?
A lump-sum repayment of the entire principle at bonds maturity
How would a non bullet issue pay out?
Repay the principal over a series of payment
What is a Split Issue
Each share is split into a number of shares, usually to reduce market price
What is considered more risky, bullet bonds or non-bullet bonds
Bullet Bonds
What is a sinking fund
Where the money owed to an investor is held with a trustee - who may re-invest the money in the bond market
What are puttable bonds
`Bonds that give the investor an opportunity to be redeemed early
What is a Bonus Issue
Giving shareholders additional shares for no extra charge, usually to reduce the market price of that share
What is a reverse split issue
Shares are combined or consolidated.
What is the difference in impact between Bonus issue and Split issue
A bonus issue will increase the share capital line, Split issue will not.
Why would a company execute a Reverse Split Issue
If there share price has fallen to low
Bonus issue calculation
1-4 Basis, $2.00 Per Share, 1 Million shares in issue, $0.25 nominal value.
Number of Shares
1 Million + 0.25 Million (Because 1 share for every 4)
Total Nominal Value
1.25 Million x $0.25 = $312,500
What does Pre-Emptive rights give a current shareholder when capital raising events are being discussed?
Give existing shareholders the right to subscribe to new shares before the wider public
What is a Special Resolution
Permission given from existing shareholder to execute a bonus or scrip issue
What is a provisional allotment letter
A renounceable and transferable and sets out the shareholders rights and any rights over new shares
What is the NilPaid value?
The difference between the pre rights price and the rights issue price.
How many days does an investor have to decide after receiving the provisional allotment letter
10 Business days
What is a Share Buyback?
When a company decided to use cash to re-purchase shares from existing shareholders
What is an AGM
Annual General Meeting
What is a Block Trade?
Investment Bank acting for the company will seek to do a small number of large trades with investors
What is an accelerated book build?
What are the four options to an investor when presented with a Rights issue
- Take up the rights in full
- Sell the rights nil-paid in full
- Sell part of rights nil-paid to preserve current stake without dilution
- Take nada action
Equation for ‘Swallowing in the tail’
(Issue price of news shares x number of shares allocated) / Theoretical ex-rights price
What is a ‘Dawn Raid’
An investor looking to takeover a company buying up large shares as soon as the market opens
What does a CFD not over an investor in a takeover?
Elements of control, they will not be able to attend meetings or demand a seat on the board as the shares are not there’s in practice
