ECM Flashcards
What are the typical characteristics of preferred stock?
Hybrid between debt and equity
Receives dividends, which can be paid out as Cash or PIK
Sometimes convertible into common stock, creating dilution
What are the two main types of preferred equity investments?
- Participating Preferred: The investor receives the preferred proceeds (i.e., dividends) amount + has a claim to common equity afterward (i.e., “double-dip” in the exit proceeds).
- Convertible Preferred: Also referred to as non-participating preferred, the investor receives either 1) the preferred proceeds or 2) common equity conversion amount – whichever is of greater value.
What are redemption rights?
A redemption right is a feature of preferred equity that enables the preferred investor to force the company to repurchase its shares after a specified period.
Protects them from a situation when the company’s prospects turn bleak.
most often not have sufficient funds to make the purchase even if legally required to so.
From the perspective of management, what are some downsides of going public?
Management could lose control
Disclosure requirements increase
Puts pressure to meet near-term perfromance metris
What are preemptive rights?
Preemptive rights allow existing shareholders to purchase a new issuance before it’s offered to other potential
buyers.
Protects from dillution
How can founders maintain control over their company post-IPO?
Dual-Class Share structure
Maintain Majority Control
Control the internal Board ofr directors
During an IPO, what is the role of the underwriter?
The underwriter, most often an investment bank, will serve as an intermediary between the company issuing
securities and the inesting public.
Tasked with handling the new issuance of stock and to ensure the public, primarily institutional investors commit to purchasing the issuance before actually becoming available for purchase in the open market.
During an IPO, what does a firm commitment mean?
refers to when an investment bank, the underwriter of an IPO, agrees to assume all the risks associated with failing to sell all the shares being listed by purchasing all the securities being issued directly from the company.
underwriter bears all risk
Could you explain the Dutch auction pricing method in an IPO?
Lower price till all shares sold
Price is based on bids instead val.
Game theory pricing
What is a private placement?
A private placement is when a company raising capital issues shares to only a select few institutional investors.
Cornerstone vs Anchor Investor
Cornerstone zeichnen schon im vorfeld der Vermarktung
—> haben einen lock-up
Anchor Investoren zeichnen einen signifikanten Betrag. “Lead Order”
—> kein lock-up
Pre-IPO Investoren?
1 bis 2 vor einem geplanten IPO fließen über Beteiligungen neuer Investoren am Eigenkaptial oder wandelanleihen zusatzliche mittel an das unternehmen
Veräußerung von treasury Stock
Kapitalerhohung gleichgestellt
Sind bereits zum handel zugelassen
Free float?
Sehr wichtig bei der Bewertung einer Aktie
Signifikante correlation zwischen free float und liquiditat
Aufnahmekriterien fuer Index
Handelsvolumen und Free float und Market cap
