Lecture9 - Initial Public Offerings AEM 423 Copyright by...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
1 AEM 423 Copyright © by Vicki Bogan Initial Public Offerings Initial Public Offerings (IPOs) z Stocks issued by a formerly privately owned company selling stock to the public for the first time z Public offerings are issues sold to the general investing public that can be traded on the secondary market
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 IPOs versus SEOs z IPOs distinctly different from { Seasoned Equity Offerings (SEOs) which are new issues offered by companies that already have “floated” equity { Private placements which are issues that are sold to a few wealthy or institutional investors at most Why Go Public? z Raise Money z Being publicly traded also opens many financial doors { Due to the increased scrutiny, get better rates when do issue debt { As long as there is market demand, can always issue more stock { Easier to implement employee stock ownership plans to attract top talent
Background image of page 2
3 Role of Investment Bank z Public offerings are typically marketed by investment bankers { Manage the issuance of new security to the public { More than one investment banking firm usually markets the securities z Underwriters z A lead firm forms an underwriting syndicate of other investment banks Role of Investment Bank z Advise the firm regarding the terms on which it should attempt to sell the securities z File preliminary registration statement with the Securities and Exchange Commission (SEC) { “Cooling Off Period” in which SEC investigates to make sure all material information has been disclosed z During cooling off period, put together Preliminary Prospectus { Red herring – U.S. { Preliminary or pathfinder prospectus – other countries
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 Quiet Period z Also referred to as the “waiting period” z Extends from the time a company files a registration statement with the SEC until the SEC staff declares the registration statement “effective” z Usually lasts either 40 or 90 days Quiet Period z During period, federal securities laws limit what information a company and related parties can release to the public z SEC still encourages companies to continue making normal corporate announcements in the ordinary course of business
Background image of page 4
5 Road Shows z After preliminary prospectus has been distributed to interested investors, have road shows { Travel around the country to publicize the imminent offering { Attract potential investors and provide information { Collect information about the price at which they will be able to market the securities Road Shows z Large investors communicate interest in purchasing shares of the IPO { Indications of interest called a book { Process of polling potential investors is called book-building
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6 Book-building z Consists of three main steps: 1. Investment bank determines which investors will be invited to participate 2. The participating investors are invited to submit bids (non-binding) z Strike bids – the bidder is prepared to buy a given
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/03/2009 for the course AEM 4230 taught by Professor Bogan,v. during the Fall '08 term at Cornell University (Engineering School).

Page1 / 25

Lecture9 - Initial Public Offerings AEM 423 Copyright by...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online