issuing equities Flashcards
primary market
T+1
> IPO
> Secondary offers (firms issues more shares)
dilutive issue (new shares to issue, seasoned offer)
non-dilutive issue (company directors or founders release their own)
> secondary mrkt acts as benchmark for pricing for primary market
offer for subscription: general marketing activity
issuing shares directly to the general public
prospectus
large issuers
offer for sale: general marketing activity
issuing house buys shares form issuing company and sells
issuing company guaranteed to sell all shares
priced at a similar firm’s security already trading in the market
allocations trated on a prorate basis for oversubscription
not just for new issues but for large shareholdings being sold in the market (gvmnt privatisations)
offer for sale by tender
tender offer: tender bids for firms shares, succesfull applicants pay common strike price
accelarated book building: exisitng clients interest, build a book, happens very fast
placing: selective marketing
issuing house but does not sell to thei nvestment community but to assets mngrs and wealthy individuals
cheaper and faster
smaller firms
intermediaries offer
use several brokers
equity crowdfunding
start-ups or innovative firms that are not listed
equity from public through a crowd funding hub
introduction (method of lisitng)
not a marketing operation
don’t raise new capital
platform for future capital raising activities
firm obtains listing on LSE without new capital issuance
prospectus not necessary
listing particulars
can be used by firms listed on overseas stock exchange that want to increase their potential shareholder base
rights issue
shareholders buy new shares in proportion to their exisitng shares
pre-emption rights
secondary issuance on the primary mrkt
rights attached to ordinary shares
can lead to no dilution of ownership
offered at a discount
theoretical ex-rights price
dilutes price in the market
> expected price of the shares after the rights issue
nil paid price
the theoretical price an investor would receive/pay for the right to subscribe for a discounted share in rights issue
theoretical ex-rights price - subscription price
scrip issue helpful when
share price to iliquid
underwriting used
situation where share issued are generating proceeds
offers
placings
right issue
( not for scrip or introduction where no new capital is raise)
share buy backs can be held in treasury shares
> reissue at a later date
employee share scheme
cancellation
reasons for share buy backs
> undervalued buy own cheap shares
alternative to dividends
deploy surplus cash
less equity and more debt , rationalise capital structure, high debt-to-equity ratio , borrows money or from bonds issuance to purchase its own shares
increase value of stock and firm
