Raising Capital Flashcards
IB’s role in helping a company raise capital?
connect the company to investors
they get paid advisory fees
how do IBs help with valuations?
IBs have expertise in valuations and help clients value their corporations for IPO/equity purposes
how do IB’s specialise in IPOs?
they have expertise in bringing companies to market
what are the various ways that companies can raise capital?
issuing new securities (e.g., equity in the form of an IPO)
issuing bonds (accepting loans from public)
debt financing (accepting loans from banks)
IPO?
initial public offering
the process of a company transitioning from being private to public
what is a private company?
a privately owned company with a limited number of shareholders
what is the purpose of an IPO
to help privately owned companies expand and raise substantial company by receiving investment from the public in return for equity shares
dilution?
the process of reducing one’s equity share in a company
how does a public company expand?
expansion can occur through further dilution
issuance of more equity to the public to raise further capital
private placements?
the process of connecting companies to private, select investors
a small number of investors may invest a large amount
what is an investment bank’s role in private placements?
they broker and act as an intemediary between the company and the investors
as a result, they obtain a commission
why private placement over IPO?
company may not be big enough
the markets may not have an appetite for an IPO
the company may be too young
the company may prefer not to have its stock publicly traded
