Primary and Secondary Markets Flashcards
(35 cards)
What are the main stages of an IPO? (3)
Decision to raise capital via IPO
Prospectus preparation
Sale of securities led by the investment bank
What is underwriting in an IPO?
This is where the investment bank agrees to try and sell all shares available in the IPO and take on any leftover shares which aren’t placed
What is a follow on Offering?
Where an already listed company decides to raise more capital with an additional IPO containing a base number of shares
What is a greenshoe option?
This is where a company undertakes a follow on option and retains the right to issue more shares in case there is larger demand. This is also known as an over allotment option
What is an offer for sale?
This is where a company seeking a listing approaches in issuing house (e.g. investment bank) that approaches potential shareholders
Features of an offer for sale (2)
Company doesn’t always necessarily issue new shares
Can be used when by a company’s founders to release some or all of their equity stake
What is a fixed priced offer (for sale)?
Subscribers apply for the number of shares they want to purchase at a fixed price which is usually fixed just below the price of fully subscribed shares
What is a tender offer (for sale)?
Where the price is set at a level that doesn’t lead to over subscription by the issuer inviting tenders for prices rather than setting a price
What is selective marketing/placing?
This is where an issuer markets the issue directly to a broker, institution or issuing house i.e. they are selecting who the securities are marketed to
What is a private placement?
Offering marketed to sophisticated investors so a prospectus is not prepared as disclosure is less onerous due to ability of investors to make their own decision
What is an introduction?
This is where a company wishes to become listed in order to gain access to the secondary market and utilise liquidity in its shares
What is the difference between exchangeable and convertible bonds?
Convertible bonds can be redeemed for shares of the same company whereas exchangeable bonds can be redeemed for shares in a diff company owned by the same group
Who is part of an origination team?
Issuer, investment bank, reporting accountants, legal and PR advisors
What is stabilisation?
When a large number of new securities are issued, the lead manager agrees to buy back the securities in the market if the price falls below a certain level to prevent a substantial fall in the value of securities
Who is part of the syndicate group? (2)
In listings of large quantities of securities, the syndicate group includes stockbrokers and investment banks
The sponsor is the lead manager
What is a broker/dealer?
Larger banks which allow their
What is a broker/dealer?
Larger banks which allow their clients to both arrange and deal
What does the Companies Act require companies to do? (2)
Prepare annual audited accounts
Hold an AGM
What is the role of the FCA? (3)
Recognise an Exchange before it can trade in the UK
Assess if an exchange has sufficient systems in place to run a market
Through the UKLA lays down detailed rules that have to be met before a company is admitted on the Official List
What is AIM’s purpose?
Less stringent admission requirements provide market for smaller, less well established companies
Requirements for a Premium Listing on LSE (5)
Must be incorporated and represented by a sponsor with trading record of at least 3 years
Market cap of at least £700,000
At least 25% of the company’s shares in public hands exc directors and their associates or one person holding more than 20% of the capital
Can’t issue warrants of more than 20% of the issued share capital
Must publish prospectus
Requirements for an AIM listing
No transfer restrictions
There is a nominated advisor and broker appointed
If company ceases to have broker or or advisor, shares are suspended from trading
If company still doesn’t have broker or advisor after one month, removed from AIM
Requirements for an AIM listing (4)
No transfer restrictions
There is a nominated advisor and broker appointed
If company ceases to have broker or or advisor, shares are suspended from trading
If company still doesn’t have broker or advisor after one month, removed from AIM
Who issues bonds? (6)
Supranationals
Governments
Agencies
Municipalities
Corporates
Financial institutions and SPVs
