Primary Markets

Question 1

who is the sponsor

Answer 1

(listing agent)
assesses company’s suitability for listing
assesses best method of bringing company to market
co-ordinates production of prospectus

Question 2

who is the corporate broker in an issuance

Answer 2

issuing house,
interface between company and the market
advises company on market conditions

Question 3

underwritten vs best efforts

Answer 3

best efforts: if shares remain unsold they go back to the issuer

Question 4

what is a greenshoe

Answer 4

when issuer can issue up to 15% more shares if there is a lot of demand

Question 5

how long can stabilisation of a new issue last

Answer 5

30 days

Question 6

what are the three types of offers when a company issues shares

Answer 6

offer for subscription (highly exp company, issues its own shares directly to investor),
offer for sale (sale of shares through issuing house),
placing (qualified investors only, selective marketing technique, cheaper than offer for sale)

Question 7

what is an introduction

Answer 7

company obtains a listing without issuing new share capital

Question 8

who issues agency bonds

Answer 8

in the US,
ginnie mae,
freddie mac,
fannie mae,
sallie mae

Question 9

what is a competitive auction and how does it work (UK)

Answer 9

UK gilt issue bids for > £1,000,000 nominal,
only GEMMs,
own prices (have to pay price you state in your bid), so prices can vary

Question 10

what is a non-competitive auction

Answer 10

retail can bid,
DMO set price, volume weighted average price,
min bid £1000

Question 11

how do French and German auctions work

Answer 11

Bid pricing system, like UK

Question 12

how does US government auctions work

Answer 12

single price auction (dutch auction),

same price is lowest of successful bids

Question 13

what is shelf registration

Answer 13

companies issuing bonds can apply for single registration that covers multiple issues,
typically used in US for medium-term notes

Question 14

When an issue in the eurobond market is achieved through a placing, the mandate to issue the bond is awarded to the:
AManagement group BLead manager CManagement and the lead manager DIssuer jointly with the management group

Answer 14

the mandate is awarded to the lead manager

Question 15

Who decides whether a company is appropriate to apply for a quotation on an exchange?
AListing agent BBroker CThe regulator DCompany secretary

Answer 15

listing agent

Question 16

An underwriter guarantees to purchase any stock of company A that fails to be taken-up in an IPO. At what price is the underwriter likely to make this purchase if called on to do so?
AThe underwriter will need to pay the issue price to ensure all shareholders are treated equally BAny surplus shares will be taken-up at a premium to the issue price to ensure the company raises sufficient capital CThe shares will be taken-up at a discount to the issue price, and implied in that discount is the underwriter’s fee DThe price of the share on the market after issue will determine the price the underwriter will pay

Answer 16

The shares will be taken-up at a discount to the issue price, and implied in that discount is the underwriter’s fee

Question 17

Which of the following is not required of a company seeking a listing on the London Stock Exchange?
AMust have been trading for at least three years BMust release at least 25% of its shares to the public CMust agree to comply with continuing obligations DMust be a private limited company

Answer 17

Must be a private limited company,

companies seeking a listing must be a public limited companies

Question 18

In order for a company to list equity on a junior market, what is the market capitalisation required?
A£900,000 B£700,000 C£200,000 DThere is no limit

Answer 18

There is no limit

Question 19

The difference between offers for subscription and offers for sale is best described as:
ABoth methods involve an issuing house but an offer for subscription is always at a fixed price BAn offer for sale involves an issuing house while an offer for subscription does not CAn offer for subscription involves an issuing house, but an offer for sale does not DBoth methods involve an issuing house, but an offer for sale is always at a fixed price

Answer 19

An offer for sale involves an issuing house while an offer for subscription does not