Types Of Markets Flashcards by Shawn Karim

Primary offering

The proceeds go to the issuer

Must file a registration statement (S-1) W/ SEC

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Registration statement components

Description of the business

Holdings of the issuer stock

Identification of control persons

Biographical data on the officers and directors

Company’s capitalization

Proposed usage of the issues proceeds

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Registry statement has inaccuracies

The SEC can issue deficiency letters to postpone/prohibit the sale of the security

SEC does not evaluate or approve the merits of a security

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Final prospectus

Registration statement is included

Contains:
Official price
Effective date

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Cooling off period

Time between the filling date and the effective date

No offers of sale happens during this time.

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Preliminary prospectus/ red herring

Distributed during the cooling off period to generate indications of interest (IOIs)

Contain pertinent information about the offering

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“Tombstone” announcement

Published prior to the effective date.

Contains:
Probable price range
Description of the issue
Identifies members of the syndicate

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Final prospectus delivery rules

Must be delivered by 25 days from the effective date.

OTC securities = 90 days
if haven’t previously issued a stock

40 days if the OTC has previously issued

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Free writing prospectus

Issued by a well-known seasoned issuer

Contains info not in the registration statement

Can say more because more info is known about this personnel

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During the restricted period, offering participants—

Cannot do anything that would influence the price of the stock

These periods vary from corporation to corporation and largely is impacted the company’s average trading volume (ADTV)

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Quite period IPO vs. APO

IPO = 10 days
APO = 3 days
After effective date.

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Registering securities in the states; 3 methods

Notification

Coordination(done with SEC filling)

Qualification (full registration statement with the other state.)

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First market

Trading securities listed on an exchange

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Second market

Trading of unlisted securities OTC

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Third market

Listed securities trading OTC

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Fourth market

Electronic trading of large blocks between institutional investors (instinet)

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New York stock exchange(NYSE)

An auction market
Hours: 9:30a-4p

A member of the NYSE owns a seat on the exchange

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Over The Counter (OTC)

24-hour, global market

Prices negotiated between 2 parties

NASDAQ

Electronic quote system
Has asset requirements to join

Market makers sell/buy shares at a par of 100

Non-NASDAQ OTC stocks

Quoted via “pink sheets”

Penny stocks are also quoted on pink sheets

Consolidated quote system (3rd mrkt)

OTC Market w/ negotiated trades

Includes:
Exchange-listed stocks
ADR
Rights
Warrants

Electronic communication networks (4th market)

Trades direct to consumer between large corporations

Use Electronic Communications Network (ECNs)

Restricted persons may purchase IPO as long as….

They do not own more than 10% of the portfolio

Regulation D

Private placements that can raise up to 5 million within 12 consecutive months with limited disclosure documents and an unlimited amount of money if all investors are accredited.

It allows issue is to offer security to private placement. The unregistered non-exempt securities will be sold to an unlimited number of an accredited investors and up to 35 unaccredited

Rule 144a

Allows qualified institutional buyers to buy unregistered or restricted securities from issuers

The underwriting agreement

The specifies the terms and conditions under which the underwriter may sell the shares to the public

The managing underwriter may keep…

Due Diligence file Form a syndicate with other brokers to sell securities to the public

Syndicate latter

An agreement among underwriters is between the underwriters in the syndicate

Standby underwriting

All shares being offered are guaranteed to sell. At the end of the rides are finished standby undivided purchases any remaining shares from the issuer

A mini max Offering

The deal is canceled if a specified minimum amount of the deal does not sell

The difference between the syndicate and the silent group…

This other group assumes no liability for unsold shares. This is a difference in the degree of financial commitment

The carve-out provision

Allows restricted individual’s to participate in 10% of the shares purchase through the IPO. With the remaining shares divided among other folder investors.

Secondary offerings

Are either registered secondary offerings or 144 trades. Is the sale of already issued and outstanding shares Proceeds go to a party other than the issuer.

The SEC allows the transfer of certain securities without registering them

These are including those acquired to mergers, acquisitions, considerations and substitutions. This also applies to stock splits, changes in power value and stock dividends.

Tender offer

A formal offer to the existing shareholder to purchase stock above current market value

Shelf offerings

Firms file one registration statement covering several issues of the same security prior to the public offering.

Seasoned issuers

Form S-3 To file a blanket registration statement to open a three-year shelf window

Unseasoned issuers

File out form S-1. | this opens a two-year shelf window

Exempt securities include…

US government agency securities and municipal securities. Exempt from registering with the SEC.

Exempt transactions include…

Intrastate offerings, small issues, and private placements which allow an issue were to offer non-exempt unregistered at security.

Rule 147

Allows an interesting issue to become an exam security at the federal level

Regulation A

Offerings are used for public offerings of new issues up to $5 million over a 12 month period. And offering circular is used inside of a prospectus for disclosure

Reg A+ (both tiers)

Tier 1: offerings up to 20 million, no more than 6 million on the behalf of affiliates Tier 2: Offerings up to 50 million, no more than 15 on the behalf of affiliates Created under the jobs act