3a primary markets

Question 1

Sponsor listing agent?

Answer 1

Assess suitability for listing
Assess best method of bringing co. to market
Coordinates production of prospectus

Question 2

Legal advisors?

Answer 2

Ensures relevant matters are in prospectus

Question 3

Public relations?

Answer 3

To create positive perception of company

Question 4

Accountants?

Answer 4

Validates financial statements in the prospectus

Question 5

Corporate broker?

Answer 5

Interface between the company and the mkt
Advises the company on curent mkt conditions
Issuing house at IPO stage and ongoing

Question 6

Underwriting meaning?

Answer 6

Where a bank guarantees the minimum level of proceeds on an issue

Question 7

What is a lead manager?

Answer 7

Firm given responsibility to coordinate issuance of securities through a syndicate.
Generally the sponsor

Question 8

Co-manager?

Answer 8

Appointed by the lead manager to assist in issuance

Question 9

Issuing house?

Answer 9

Usually an investment bank
Corporate
Invited applications form the public at a slightly higher price than the issuing house had paid the issuing company through an offer document

Question 10

Bookrunner?

Answer 10

A firm who is given the role to coordinate the overall level of investor demand
typically the lead manager

Question 11

Co-lead manager?

Answer 11

Joint responsibility to coordinate issue of securities
Usually in a different geographical area

Question 12

Purpose of underwriting?

Answer 12

Means of guaranteeing a minimum level of proceeds from a share issuance
Used in all situations where share issues are generating proceeds

Question 13

Is there a limit on number of underwriters?

Answer 13

no

Question 13

What does non-dilutive follow-on offering mean and give an example?

Answer 13

Shares brought to the market from issued share capital but not part of the free float
E.g. directors selling own shares to investors

Question 14

Stabilisation?

Answer 14

Where a lead manager in an issue purchases stock in the secondary market to support the issue

Question 15

What does dilutive follow-on offering mean?

Answer 15

When company’s board agrees to increase share float for the purpose of sellling more equity in the company

Question 16

Open offer?

Answer 16

Offer open for exisiting shareholders to take up and buy the shares or not to buy

Question 17

Offer for subscription

Answer 17

Company issues shares direct to the general public - not so common

Question 18

Offer for sale

Answer 18

Similar to offer for subscription except a bank “issuing house” buys up the shares before offering them to the public - more common

Question 19

Fixed price offer

Answer 19

Often at an offer price which is artificaly low to generate goodwill amongst purchases - encourage active secondary mkt

Question 20

Tender offer

Answer 20

Investors make bids and issuing house then selects applications with highest bids

Question 21

Placing meaning?

Answer 21

This is like an offer for sale apart from issuing house sells only to large institutional clients, typically on selective basis.
No need for prospectus here
For qualified invesotrs, not a public offer

Question 22

Intermediaries offer

Answer 22

A placing made through issuing houses (brokers)

Question 23

Introductions? When might this happen?

Answer 23

Company obtains listing without issuing new share capital
This is when company is aleady quoted on an overseas stock exchange and might seek to expand potential SH base on another exchange

Question 24

Prices in placings vs. offer for sale?

Answer 24

Placing is cheaper than offer for sale because of fact that it is for qualified invesotrs - selective marketing technique. Issuers are exempt from obligation to produce a prospectus

Question 25

Conditions for listing - how many years of audited accounts?

Answer 25

3 years

Question 26

Conditions for listing - share ownership for main market companies?

Answer 26

10% to the public

Question 27

Listing rules - disclosure requirements

Answer 27

Price sensitive info Dividends, director's dealings, changes in registers Financial info

Question 28

Two types of bond issuers specifically in the US?

Answer 28

Municipal bonds (e.g. states/local authorities) Agency bonds (e.g. govt sponsored agencies)

Question 29

Why are municipal bonds attractive?

Answer 29

Because interest income is exempt from federal income tax and in many cases, state and local taxes

Question 30

What is attraction of agency bonds?

Answer 30

They are backed by government, considered safe investments

Question 31

Who issues UK govt gilts and what style?

Answer 31

DMO, competitive bid (auction) have to honour price

Question 32

UK govt gilts - what is min GEMMS are required to bid?

Answer 32

>1mn nominal

Question 33

French and German bonds - how is this done?

Answer 33

govt auction, bid pricing system

Question 34

US govt bond issues - how is this done

Answer 34

Tender style - single price auction Done by the dept of treasury - FED

Question 35

What are non-competitive bids, how does the process work?

Answer 35

WHen govts issue a smaller tranche of debt using a non-competitive process. Non comp bids are allotted at the weighted avg. price of the accepted price bids.

Question 36

How can debt capital be raised to fund developments in a business (3 ways)

Answer 36

Schedules programmes to borrow money than issue bonds Shelf registration Company issues MTNs in response ot client requests

Question 37

What is shelf registration - how long does it last, where is it used?

Answer 37

Single registration covers mutliple issues Up to 2 years Typically in the US with medium-term notes (2-10 yrs to maturity)

Question 38

What is a reverse enquiry?

Answer 38

When investors request the bond and company responds - i.e. they issue MTNs in response to client requests

Question 39

Bond issue: pitching?

Answer 39

Investment bank interested in managing the issue makes a pitch to the issuer

Question 40

Bond issue: indicative bid

Answer 40

Indicaiton given by investment bank to issuer regarding how much the bond issue may raise

Question 41

Bond issue: mandate announcement

Answer 41

Announcement of banks given the mandate to manage the bond issue

Question 42

Bond issue: credit rating

Answer 42

IB will try to obtain favourable credit rating for the issue from rating agency. Success of the issue and interest rate required by investors depend on this credit rating

Question 43

Bond issue: roadshow

Answer 43

Series of meetings with potential investors and brokers, conducted by ocmpany and its underwriter to market the issue

Question 44

Who can take part in comeptitive bids?

Answer 44

Large investors Only GEMMS can enter bids with the DMO Min NV of 1mn and multiples of 1mn If successful, pay the bid

Question 45

Non-competitive bids - who can take part?

Answer 45

Give private investor opportunity to take part No price bid Bid in minimum of 1k lots, max of 500k Pay the avg of successful competitive bids

Question 46

Difference between tender vs. auction?

Answer 46

Auction: successful bidder (each) pays the price they bid Tender: the successful bidders pay the lowest successful price