Tutorial 11

Question 1

what’s the difference between private and public companies?

Answer 1

private company’s owned by the company’s founders, management or a group or PRIVATE investors

public company’s a company that sold a portion of itself to the public via IPO

Question 2

what’s an IPO?

Answer 2

an IPO refers to the process of offering shares of a private company to the public (in primary market)

Question 3

what is the purpose of an IPO?

Answer 3

allows companies to raise equity capital from public investors

Question 4

is an IPO considered the last stage of development of a company?

Answer 4

yes

transition from private to public is an important time for private investors to fully realise gains from their investment

Question 5

who are the main actors in an IPO?

Answer 5

the issuer (the company becoming public)

the underwriter (the investment bank)

the lawyers, the accountants, the analyst, the brokers, the stock exchange & the public investors

Question 6

SPAC = ?

Answer 6

special purpose acquisition company

Question 7

what are SPACs?

Answer 7

companies listed on the market for a special purpose

the special purpose is to acquire a private company

Question 8

do SPACs have a financial history?

Answer 8

no

they don’t because they don’t have balance sheets

they are cash-shell companies

Question 9

what is the only valuable asset in a SPAC?

Answer 9

the directors or sponsors of the SPAC

Question 10

who are sponsors of a SPAC?

Answer 10

promoters of the SPAC

usually very well known businessmen

Question 11

when do companies go public and why?

Answer 11

companies go public when they’re trying to take their operations to the next level

Question 12

going public = ?

Answer 12

selling shares to investors in the open market

allows companies to raise capital

Question 13

is SPAC an alternative to IPOs?

Answer 13

yes

Question 14

why are SPACs becoming increasingly popular?

Answer 14

they’re often quicker than IPOs to execute

Question 15

why are SPACs formed?

Answer 15

to acquire a company and take them public

Question 16

what is the difference between primary and secondary markets?

Answer 16

primary market is where securities are created (IPO’s, SPAC’s)

secondary market is where securities are traded (NYSE, NASDAQ)

Question 17

what’s the difference between listing requirements and market practices?

Answer 17

listing requirements are the market rules agreed by a specific stock exchange

market practices are developed by market operators and aren’t usually included in market rules

sometimes market practices become so important, that exchanges recognise them inside their own rules

Question 18

the VOC?

Answer 18

a chartered company established by the States General of the Netherlands

first joint stock company in the world

sometimes considered to have been the first multinational corporation

Question 19

why’s the history of the VOC important?

Answer 19

was the first time when the principle of limited liability shareholders was established

also outlined the agency issue of control in corporations between directors and shareholders