Salg av vedipapirer

Question 1

Gi en oversikt over temaene for salg av verdipapirer

Answer 1

Institutional
– the debt market
– why going public ?
– issuing equity
 Issue costs
 Long term performance of IPOs and SPOs

Question 2

Hva består kredittmarkedene av?

Answer 2

Bankmarkedet:

• Banklån
• Syndikerte lån
• Letter of creditt (L/C)

Det finansielle markedet:

• Privat:
• • Tradisjonell
• • Rule 144A
• • (QIB = “Qualified Institutional Buyer”)
• ‘Offentlig’
• • Commercial paper (CP)
• • Medium-term notes (MTN)
• • Corporate bonds

Question 3

Gjør rede for egenkapital livssyklusen

Answer 3

Dimensjoner: Tid/Vekst.

1. Start-up
   - Venture capital
   - - Business expertise
   - - Patience
2. Growth
   - Public
   - - Diversification
   - - Liquidity
3. Mature
4. Restrukturering
   - Private equity
   - - Control / Information
   - - Business expertise

Question 4

Hva er fordelene og ulempene ved å gå offentlig?

Answer 4

Going public
Advantages:

• Access to a deep market
• Liquidity & DIVERSIFICATION
• Montoring and information
• Enchance credibility
  (customers, suppliers, employees)
• Exit for Venture Capitalists
• Medium of payment
• • M&A
• • Incentive plans

Disadvantages:

• Expensive
• Public pressure
• • Shareholders / analysts
• Information to competitors
• Control
• Unfriendly takeover

Question 5

Redegjør for egenkapitalstifetelsesmetoder

Answer 5

Privat:
1. Privat plassering

Offentlig:
2. Cash offering (IPO/SPO)
2-1 Firm commitment
2-2 Best effort Auction

Felles: Hvem som helst kan kjøpe nye aksjer.

3. Rights issue
   3-1 Standby
   3-2 Uninsured

Felles:
Bare nåværende investorer har rettigheter; kan selges til andre investorer.

Question 6

Hva er underskriverens rolle når et selskap skal gå offentlig?

Answer 6

7
Underwriter’s Role
 Advise
- Design, timing, and pricing of offer
– Registration, forming syndicate
 Certification
- Due Diligence, underwriter’s reputation
 Distribution
- Due Diligence, underwriter’s reputation
 Risk bearing
− Guaranteeing or buying the issue

Question 7

Gi en oversikt over ulike issue costs

Answer 7

direct costs = administrative + underwriting
– underpricing of IPO’s
– negative reaction to SPO’s (seasoned public offering)

Question 8

HVordan er forskjellene mellom direkte utstedelseskostnader for ulike verdipapirformer og hvilke har vi?

Answer 8

t = total
odo = other direct costs
gs = gross spread

1. IPO
   t: 11,1%
   odo: 3,3%
   gs: 7,3%
2. SPO
   t: 7,1%
   odc: 1,7%
   gs: 5,4%
3. Convertible
   t: 3,8%
   odc: 0,9%
   gs: 2,9%
4. Straight bond
   t: 2,2%
   odc: 0,6%
   gs: 1,6%

Question 9

Hva er gjennomsnittlig underprising ved IPO?

Answer 9

18%

Question 10

Hvordan er forskjellene i IPO underprising i ulike land?

Answer 10

se utklippsdok.

Question 11

Hva forklarer IPO underprising?

Answer 11

Underwriter’s incentives:
– costs of unsold shares
– avoid litigation
– use monopoly position (paying other clients)

 Management better informed:

– improve a future, larger issue (‘loss leader’)
– window-dressing of accounts (long-term)

 Some investors better informed:

– pay for information revelation (book building)
– winner’s curse
‘I would never join a club that want me as a member’ (Groucho Marx)

 Statistical error: truncation of distribution:
- The data set excludes withdrawn issues

Question 12

Hva kan forklare negative reaksjoner på SPOs?

Answer 12

Asymmetric information
– current owners: issue if stock is not undervalued
E(p|issue)

–>representative issues are perceived as overpriced

Question 13

Hva bestemmer størrelsen på prisfallet?

Answer 13

19
What determines the size of the price drop?
 Probability that the security is seriously overvalued
(variance of p)
 Degree of information asymmetry
 Seller’s incentive to take advantage of superior
information
 Cost of foregoing investment for undervalued firm

Question 14

Hvordan løse markedets negative reaksjon på SPOs?

Answer 14

20
Resolving the negative reaction to SPOs
 Underwriting does not remove the problem
 Rights issue works better: owner selling shares to
themselves
 Rights issues dominate in Europa
(concentrated ownership; the law),
 while firm commitments dominate in the US
 Deeply discounted rights issues were used in 2002
by large, troubled firms – e.g. Ericsson, ABB

Question 15

Redegjør for informasjonsassymeterier.

Answer 15

Information asymmetries
 Issuing securities (equity & debt)
 Trading securities: insiders

 Selling a used car (the ‘lemon’ problem)
 Getting a loan
 Getting health insurance
 Seeking employment

 Adverse selection: “Bad Money driving out Good”

– lowers expected quality - E(p|issue)

– may destroy the market (Equity or credit to small firms)

The problem is increased by Moral Hazard:

agency costs from diverging incentives
– equity: management vs owners; large vs small owners

– debt: asset substitution

Question 16

Hvordan løse informasjonsassymetrier?

Answer 16

Accreditation
– equity & debt: underwriting; regulators (SEC)
– debt: rating

Guarantees
– debt: bank guarantee; standby letter of credit

 Private transaction
– private issue

 Risk sharing
– debt: collateral, priority, covenants
– equity: rights issue; paying with shares in a
merger/acquisition

Question 17

Hvordan er den langisktige prestasjonen til IPOs og SPOs?

Answer 17

Long-term performance of IPOs and SPos
 International evidence that long-term returns (5yr)
from IPO’s falls short of comparable market returns

 Similar evidence for seasoned issues: - 30% !

 Indications that long term under performance applies,
in particular, to smaller firms taken public by less
reputable underwriters

 Indications of window dressing (‘cooking the books’)

 IPO under performance seems to disappear when
adjusting for size and P/B (small growth stocks)

 And, in particular, for IPOs backed by Venture or Buyout
funds (check Jay Ritter’s homepage)