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Flashcards in IPO Terms Deck (44):


A person or entity that directly or indirectly controls, is controlled by,
or is under the common control of, a company. Examples of
affiliates include executive officers, directors, large stockholders,
subsidiaries and sister companies.


Aggregate offering price

The total price of an offering to the public, which is equal to the
number of shares offered, multiplied by the price per share


AIM (Alternative Investment

A global market for smaller and growing companies.


American Depositary Receipts

ADRs are a convenient way for domestic investors to own shares in
foreign companies. Denominated in US dollars, ADRs allow
American investors to invest in a foreign company. ADRs are also
traded in London.



Buying securities in one country, currency or market, and selling in
another to take advantage of price differences.


Authorized share capital

The total number of shares a company is authorized to issue with
regard to its memorandum and articles of association


Bank Interchange Code (BIC)

A unique code identifying a participant.


Beneficial ownership

The beneficial owner of a security includes any person who directly
or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares voting or investment rights
with respect to said security. A person or entity may be the beneficial
owner of a security even though the title may be in another name for
safety, convenience or other reasons (such as when securities
beneficially owned by an individual are held by a broker under a
'street name'). There may be more than one beneficial owner of
a single security.



Debt securities issued by governments and companies as a means
of raising capital which generally entitle the holder to a fixed-rate
of interest during their life-time and repayment of principal at



The total amount of a company's outstanding debt and equity
securities. The term is also commonly used to refer to the capital
(debt and equity) structure of a company.


Comfort Letter

A letter written by a company's accountants and delivered to
underwriters and the company's board of directors as part of
a due diligence process. A comfort letter gives assurance to
underwriters and a company's board of directors that the
financial information included in a registration statement
corresponds to audited and un-audited financial statements and
other financial records of the company and may also include the
results of certain additional agreed upon procedures.
See also Due diligence.


Convertible bond

These bonds can be converted into a specified number of shares
of an issuing company at a pre-determined price.



Dealers buy and sell securities on behalf of a broking firm (or
investment bank) itself. Securities bought by a bank may be sold to
clients or other firms or become part of a bank's own holdings.
See also Investment bank.



These are secured corporate bonds that are used to raise long-term
debt capital.



Demutualization involves the conversion of a not-for-profit
association owned by its members into a for-profit company
owned by its shareholders.


Earnings per share (EPS)

Net income of a company for a specified period of time divided by
the number of equity securities outstanding at such time. Fully
diluted EPS assumes the exercise or conversion of all relevant
warrants, options and convertible securities into common stock.


Face value

This is the value of a bond or security as printed on a document.
Face value represents the amount that an issuing company promises
to pay at the time of maturity


Final prospectus

An offering document sent to all purchasers of a company's
stock during a public offering and immediately following it.
A final prospectus is an updated version of a preliminary
prospectus, contains all final offering information (such as
pricing and underwriting details) and reflects amendments to
the registration statement subsequent to the date of the
preliminary prospectus.
See also Preliminary prospectus.



The practice of an investor buying stock via an IPO at the offering
price and quickly selling it for a profit when it starts trading.
Though it became common during the internet boom of the late
1990s, this practice is generally discouraged by companies and
underwriters who seek investors willing to make a long-term
commitment to a company.



Also known as an IPO. The process by which a company obtains a
listing from the UKLA and is admitted to trading on the Exchange.


Gross proceeds

Offering proceeds before underwriting discounts and commissions
are deducted.


Initial Public Offering (IPO)

Also known as flotation, it is a company's first offer of shares on the
stock market. Shares may be offered at face value or at a premium.


Institutional investors

Organizations whose primary purpose is to invest their own assets
or those entrusted to them by others, the most common of which
are employee pension funds, insurance companies, mutual funds,
university endowments and banks.


Investment bank

An investment bank is a financial intermediary that offers a range of
services and advice to its clients. The role of an investment bank
includes corporate finance, securities trading, research, investment
management and international finance.


Investment trust

A collective investment trust in the form of a listed company which
holds a portfolio of securities on behalf of its own shareholders.
Because an investment trust is itself a listed company, its shares can
be bought and sold in the usual way.


Issuer implementation team

The department at an exchange responsible for dealing with
applications for admission to trading.


Lock-up agreement

An agreement between a company or its underwriters as one party,
and a stockholder as the other, whereby a stockholder agrees to
refrain from reselling its shares for a period of time specified in
a registered agreement.


Managing underwriters

Underwriters, who individually or together with co-managers,
participate in preparing a registration statement, carry out portions
of due diligence and conduct road shows.


Maturity period

This is the life of a bond or security. A bond's life usually ranges from
5 to 15 years but a few government bonds may even have a lifespan
of 25 to 50 years



The right (but not the obligation) to buy or sell securities at a fixed
price within a specified period.



In a partnership, two or more people jointly own a business. Whilst
general partners are fully liable for the debts of a business, limited
partners have limited liability.


Preliminary prospectus

An offering document used by a company and underwriters to
market a public offering. Also known as a red herring because
of the red ink used on the front page,


Rights issue

An invitation to existing shareholders to purchase additional shares
in a company


Road show

Presentations made by a company's executive management during
a public offering, in one-on-one or group format, to prospective
purchasers of securities in a public offering, typically institutional
investors. An IPO road show typically lasts from one to three weeks


Secondary offering

The portion of a registered offering being offered and sold by
existing stockholders.


Selling group

A group of dealers and underwriters selected by managing
underwriters, as the agent for the other underwriters, to market
shares in a public offering.



Complex derivative products that are settled in cash.



A group of underwriters selected by managing underwriters to
market and sell shares in a registered public offering.


Transfer agent

A transfer agent keeps a record of the name of each registered
stockholder, his or her address and the number of shares owned,
and ensures that certificates presented for transfer are properly
cancelled and that new certificates are issued in the name of
the new owner.



An investment bank that offers or sells securities to investors in
a public offering on behalf of a company either as a firm
underwriting commitment (which is the most common way) or
a best efforts offering. The Securities Act defines the term
underwriter much more broadly to cover many other
participants in a distribution of securities.


Underwriting agreement

In a registered offering, the principal agreement is signed by the
company and the underwriters to set forth the relationship between
the parties. An underwriting agreement contains an agreement to
sell and buy offered shares, the underwriting discount and
commission, representations and warranties of the parties, certain
covenants, expense allocation and indemnification provisions.


Underwriting discount and

A percentage of the gross proceeds of an initial public offering that
constitutes compensation paid to underwriters for marketing and
selling the offering.


Waiting period

The period of time between filing a registration statement and
the effective date.


Working group

Consists of key company executives and employees, a company
board of directors, managing underwriters, a company counsel, an
underwriter counsel, company auditors, a financial printer and other
parties. Working group members have various responsibilities in
preparing registration statements, including the prospectus, and
marketing and selling the company's stock to investors.