2) Flotations: Offer & Listing Applications Flashcards
(35 cards)
1
Q
When should a company be advised to make an institutional offer rather than a retain offer?
A
- If it is a specialist niche company
- That is relatively unknown to the public
- Unlikely to attract the same demand from retail investors as a recognised household name
2
Q
What are the steps involved in a retail offering?
A
- There are 2 elements
- Offer for subscription: new shares are sold to the public
- Offer for sale: existing shares are sold to the public
- Non public offers: placings / intermediary offers - offers to more sophisticated investors.
3
Q
What is a company likely to do if the listing is being effected by means of a retail offer?
A
- Also likely to accompany that retail offer with an institutional offer
- So as to be able to benefit from the institutional shareholder interest in its listing.
4
Q
What is the slight downside of retail offers rather than institutional?
A
- additional regulatory issues associated with a retail offer
5
Q
How would marketing be focused on institutional investors?
A
- Through the use of roadshows during the bookbuilding process.
- This process may be cheaper than a retail offering
- Depending on the extent of the marketing process.
6
Q
What are the benefits of carrying out a global offer rather than a UK domestic issue?
A
- Shares offered to a wider group of investors
- E.g. investors in the European / US markets
- Where they may already have a large customer base.
- Flotation can increase its profile further in these markets
- Additional interest in fundraising should also increase price at which company shares are sold to its investors.
7
Q
What is bookbuilding?
A
- Way of marketing an issue of shares
- Involves the investment bank who can often be a ‘joint bookrunner’
- Running a book of interest in the shares from interested investors.
8
Q
What is the purpose of bookbuilding? When is it frequently used?
A
- Allows the company to assess level of demand for its shares
- And to set a realistic price for them
- Frequently used for institutional equity offerings.
- On an institutional offer that has no retail element - issuer may use pathfinder in the bookbuilding process to give potential investors info about the company.
9
Q
When is a pathfinder used?
A
- On an institutional offer with no retail element
- Pathfinder used in the book building process
- To provide potential investors with more information about the company.
10
Q
What do issuers use to give potential investors information about the company in a retail offer?
A
- A price-range prospectus.
11
Q
When bookbuilding is used, how are presentations made and then what do the potential investors have to do?
A
- In the form of roadshows to potential institutional investors.
- They then BID in advance of the offer for the securities to be issued
- Bids = not legally binding
- State the number of shares that they would be willing to purchase and the price that they would be willing to pay for them.
- Within the price range that is either given be the Global Coordinator or stated in the price range prospectus.
12
Q
What determines the issue price of securities when book building is used?
A
- The level of demand that is shown by potential investors
13
Q
Why is bookbuilding advantageous for the issuer?
A
- Because by assessing demand for the company shares in advance of the issue price being set
- The issue price can be calculated more accurately
- And therefore be set at the highest realistic level.
14
Q
When is a prospectus required?
A
- S85(1)(2) FSMA= general rule.
- Have to apply BOTH of the tests to decide if proposed offer of shares requires a prospectus.
- If EITHER test satisfied and there is no exemption available, prospectus required.
15
Q
What are the exceptions to TEST 1 of the prospectus test?
A
- TEST 1 - S85(1) FSMA
- Defined- s102B FSMA
- Exemptions - s86(1)
- S85(5)(a)
- S85(5)(b) - PR 1.2.2R
16
Q
What are the exemptions to TEST 2 of the prospectus test?
A
- Test 2 - s85(2) FSMA
- Exemptions - exempt securities in Part 1 Schedule 11A FSMA, which is in PR 1.2.3R and
- This is s 85(6)(a)(b) FSMA
17
Q
When do the exemptions to needing a prospectus work?
A
- When BOTH of the exemptions apply
18
Q
When is it likely that the placing of shares will fall within the exemption to Test 1 of the prospectus test ?
A
- Test 1 is s85(1) FSMA
- When being offered to qualified investors only (s86(1)(a) FSMA)
19
Q
What is the benefit of making up a prospectus with separate documents?
A
- Can have separate registration document
- This part stays valid for up to 12 months
- Can therefore be re-used with a new securities note and summary note during that period
- But is more usual now that an applicant only produces one document for its flotation
20
Q
What are the 8 steps of the flotation process?
A
- Publication of pathfinder
- Formal bookbuilding process
- Submit documents to the FCA before prospectus is approved
- Approve + publication of the fixed price prospectus
- Submission of documents to the FCA and LSE before admission hearings
- (and 8) Hearings for admission of shares to listing at FCA and admission of shares to trading at LSE
- CREST accounts credited
- Admission and unconditional dealings commence.
21
Q
What are the requirements for when there is publication of the pathfinder?
A
- Not a prospectus
- So does NOT require FCA approval
- Subject to the advertisement regime in the prospectus rules.
22
Q
What happens while formal bookbuilding takes place?
A
- Pathfinder used as a marketing tool during the bookbuilding process.
- Institutional investors will make non-binding committments to purchase shares on the basis of the pathfinder.
23
Q
What happens when the documents are submitted to the FCA before the approval of the prospectus?
A
- The draft prospectus has to be submitted to the FCA together with a cross reference list
- That identifies the pages where each disclosure item can be found in the prospectus - PR 3.1.1R
- Final date for submission - 20 clear working days before the intended approval date of teh prospectus.
- Clear days - UKLA guidelines
- Should submit the prospectus early to allow time to respond to the FCA comments on the draft.
24
Q
When does there need to be approval and publication of the fixed price prospectus?
A
- Approved by the FCA before publication
- After approved by FCA - must be filed w/ FCA and made available to the public.
25
Why are certain docs called 48 hour documents?
- LR 3.3.2R - need to be submitted to the FCA by midday two business days prior to the listing hearing.
- Docs = approved prospectus and Application for Admission form.
26
What are unconditional dealings?
- Any dealings after admission of shares to listing and trading
27
What are conditional dealings?
- Conditional on the admission actually taking place.
28
Why would an issuer elect to publish a fixed price prospectus?
- So that it can offer institutional investors a fixed price offer of shares.
29
What happens if a company elects to publish a price range prospectus instead of a fixed price prospectus?
- Would have to file the final offer price and the amount of share to be issued
- As soon as practicable with the FCA following completion of the offer
- Then make this information available to the public
- Because of PR 3.2.4 - 3.2.6 before the admission and listing hearings
30
To what extent does s21 FSMA apply to a pathfinder document?
- A pathfinder doc = invitation / inducement to engage in investment activity unless they are an authorised person
- Pathfinders and roadshows do constitute an invitation or inducement to engage in an investment activity, as it is encouraging investment and is a financial promotion
- Therefore - company should limit the presentations in both forms to INSTITUTIONAL INVESTORS, to be able to come within an exemption of the FPO under Arts 50 / 49 / 19. (yellow tabs)
31
What are the main characteristics of the article 70 fpo exemption?
- Only covers information actually in the prospectus, not any info that replicates part of a prospectus
- Exemption applies regardless of whether prospectus is sent to retail as well as institutional investors
32
What are the advantages of bookbuilding?
- Allows company to get a non binding indication as to whether to go ahead with the float
- And allows company to assess the level of demand and set a realistic achievable price for the shares
33
What is a pathfinder?
- Draft of the prospectus
- That is not approved by the FCA PR 3.1.7
- Does not contain the price of the shares
- Only sent to institutional investors.
34
How does a pathfinder differ from a prospectus?
- Pathfinder = draft of prospectus that is not approved by the FCA, PR 3.1.7
- Pathfinder does not contain the price of the shares
- Pathfinder only sent to institutional investors.
35
How should I count the working days in the prospectus rules?
- Always clear working days, FCA guidance has confirmed that it is CLEAR working days
- And include the public holidays.
- when it is clear days add 2 days to whatever is in the PR.
But for secondary issues offer periods, just count normal business days - not clear.
