Lecture 2 Flashcards
What are the ownership risks and rewards shareholders are entitled or exposed to?
residual interest
limited liability
control
What is a market
where buyers and sellers come together to communicate for smooth and cheap transfer of ownership of any form of goods and services
What are the characteristics of a good market
market information is timely and accurate
transaction cost should be low
asset information efficient
High degree of liquidity
What is a bid-offer spread
the difference between the best bid and the best ask price
What are the 2 types of equity market?
primary
secondary
What are the methods of raising new equity capital in the primary market?
IPO
private placement
rights issue
bonus issue
What are the 2 ways you can trade
OTC
Exchange-traded
What are the advantages of going public
increases liquidity for shareholders raise capital in the future product image implement share option schemes for employees transfer of management
What are the disadvantages of going public
additional expenses pressure to perform pressure to maintain dividend and profit growth need more formal management style vulnerable to takover
What are the types of listing
primary
secondary
What are the types of primary listing requirements one has to meet?
qualitative
quantitative
Who are the people essential in the listing process?
Lead manager Lawyer CPA Public relations firm Underwriter
What are the methods of offering?
fixed price method
private placement
book building
preferential allotment
