Chapter 5

Question 1

Types of IPO

Answer 1

Offers for sale -
Most common.
Company issues shares to an issuing house in exchange for funds. Issuing House offers them to the market. This is usually underwritten.
Tender offer is when an issue is having difficulty in pricing the shares accurately so they invite bids to establish the degree of interest. All subscriptions at the price or above are allotted in full. Bits come from institutional or experienced investors. This process is described as book building.

Offers for subscription -
Special form of tender offer for sale. Issue is seek bits above a minimum subscription level. No commitment to go through with issue unless a certain level of demand is met. Only partly underwritten.

Placings -
Fastest and cheapest. Popular for smaller companies. Issuing company decides on price. They then present to big institutions to buy their stock. No underwriting.

Introductions and dual listings -
For companies that are already substantial with widely held shares are foreign companies already listed on their own stock exchange. This introduces their shares to the stock market.
Dual listing = two separate companies working under group structure, trading on more than one exchange.
Cross listing = single entity listed on multiple markets.