Lesson 8: Issuing Securities Flashcards
Selling Securities
Businesses can raise capital thru selling securities (stocks or debt)
Any offer of any security must be either registered with the SEC or have an exemption
Registration Statement
a legal document companies file with the SEC to register their securities for legal sale to the public
Follow on Offering
Any time a company offers securities to the public after the IPO
Secondary Offering
Existing shareholders sell their shares and receive the proceeds
Primary Offering
Company creates new shares to sell and receives all proceeds
Split Offering
Both the company and selling shareholders sell shares
EX: Split IPO - company sells and Venture Capitalist exits
Lead Manager
part of the IPO underwriting syndicate that manages the deal/leads the whole process
Syndicate Memebers
Financially committed members of the underwriting syndicate
They get them from the Lead manager, then sell to the public
They will buy/own unsold shares
Selling Group
Helps sell IPO shares as an agent, but is not financially committed
Shelf Registration
Allows companies that have already IPO’d to retap the market in a follow-on more efficiently.
Basically you follow the 1st two steps of IPO, but then wait before releasing. Then when conditions/timing are right you can release pretty much right away
Valid for up to 3 years, can be used for follow on offerings but not IPOs
Exempt Securities
- US gov secs
- us gov agency secs
- muni bonds
- nonprofit or commercial bank secs
- commercial paper
Exempt Transactions
- Regulation D
- Rule 144
- Rule 144A
- Rule 147
- Regulation A
- Regulation S
Reg D
Any business can do this for as much as they want as often as they want
Downside is that only accredited investors (& up to 35 non-accredited investors)
Companies that have already IPO’d can also do this
PIPE
Private Investment in Public Equity
Public companies using Reg D to raise capital
Accredited Investors
- Officers and Directors of the Issuer
- Institutional Investors w > $5mm in total assets
- High net worth individuals (>$1mm excluding home or income >$200k, $300k if married)
Rule 144 - Control Stock
The sale of securities held by insiders (officers, board, large shareholder)
They can sell 1% of the outstanding shares every 90 days
so they can’t just dump all their stock
Rule 144 - Restricted Stock
Holders of unregistered stock sell their shares
They can sell as much as they want, but they need to have held the stocks for 6 months and the company must be public
Rule 144A - QIB
Any business can raise unlimited capital as often as they like, but it must be sold to Qualified Institutional Buyers
QIB
Qualified Institutional Buyers:
Institutions with >$100 mil in discretionary assets (we don’t care if the big guys get ripped off)
Discretionary Assets
Basically liquid assets that aren’t necessary for every day operations
Rule 147
Intrastate
Companies doing in state business (80% of revenues, assets, or net proceeds are in state or >50% of EEs are in state) can raise unlimited capital as often as they like to in state residents (who can then sell out of state after 6 months)
‘Letter’ Regulation Exemtions
A - Small Businesses
M - Market Manipulation of new issues
S - Overseas Offerings
T - Margin Rule
Tender Offers
Offer by the issuer (buyback) or outsider (takeover) to buy >5% of company shares directly from shareholders
Price: typically fixed price at a premium to MV, and all holders will get best offered price
Net Long: must be net long to tender shares
Conditional: the tender may require a min number of shares
If you get more than you asked, you don’t have to buy all (say you ask for 10 get 100, only have to buy 10)
Securities Act of 1933
federal law designed to prohibit fraud
investors receive all info relating to a new stock issue
