SGS 2 Flashcards
What is the difference between an offer for sale and an offer for subscription?
Sub = company offers new shares to the public (raises capital) Sale = existing Sh offers existing shares to the public (no capital but SH realises investment)
Both are retail..
Requirements for a retail offer?
An offeror to appoint a receiving bank to accept applications from the public and deal with the payment for the shares.
Requirements for a placing?
new and existing shares offered to placees (sophisticated investors such as financial institutions and clients of the sponsor, broker or investment bank)
A placing letter is sent to placees providing terms and conditions of the offer.
The sponsor/broker may also have a placing agreement/underwriting agreement with the company.
Difference between institutional and retail?
Not usually necessary in institutional to appoint a receiving bank as there are fewer placees than there are subscribers for an IPO.
Instead investment bank will deal with proceeds of the issue.
What is the purpose of bookbuilding?
Allows company to gauge the level of demand for shares and set the HIGHEST realistic price for them.
Used for institutional offers .
Issuer uses a pathfinder to provide potential investors with information about the company (pre-prospectus statement of financial condition).
What is the retail alternative to a pathfinder?
A price-range prospectus.
Bookbuilding process?
roadshow presentations
investors make non legally binding bid for securities (state number and price within the range given)
level fo demand shown determines the issue price of the securities.
What is a lock-up arrangement?
Commercial agreement between institutional investors and main shareholders to stabilise the market (too many shares on market = low price) and make sure company establishes itself as well-known main market listed company.
What is the first event in flotation process?
Publication of a pathfinder as this does not require FCA approval.
(subject to advertisement regime set out in Prospectus Rules).
What is a pathfinder and what happens after its publication?
Draft of the prospectus which is not approved by the FCA PR 3.1.7 and which does not contain the price of the shares and is only sent to institutional investors.
Bookbuilding process.
What are the first set of documents that must be submitted to the FCA for approval?
draft prospectus + cross reference list (PR3.1.-1R)
20 working days before intended approval date of prospectus, if a new application.
In practise often submitted earlier than 20 working days before.
What happens after the first set of documents are sent to the FCA?
Approval and publication of final prospectus.
What are the next set of documents?
48 hour documents, submitted to FCA and LSE two business days prior to ADMISSION hearing.
Approved prospectus and application for Admission form.
What happens after 48 hour documents are submitted?
Hearings for admission of shares and listing at FCA
Admission of shares to trading at LSE.
Final two steps?
CREST accounts credited.
Admission and unconditional dealing commences. (unconditional as conditional refers to dealings before Admission which are conditional on admission taking place)
