Chapter 19 - Issuing securities to the public

Chapter 19 - Issuing securities to the public - Chapter 19...

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Chapter 19 Issuing securities to the public 19.1 The public issue Basic procedures for a new issue 1. Pre-underwriting conferences – obtain approval from the board of directors 2. Registrations statements filed and approved – statement contains great deal of financial information The basic procedure for a new issue Steps in public offering Time Activities 1. Pre-underwriting conferences Several months Amount of money, types of securities, underwriting contract, board approval 2. Registration statement 20 days Contains financial & business information 3. Pricing the issue Last day of registration period Seasoned offer: price market price Shortly after price setting Commitment contract: underwriting 5. Market stabilization 30 days after offering Place orders to buy o Tombstone – advertisement used during and after the waiting period 19.2 Alternative issue methods o Private issue - issue is sold to fewer than 35 investors, no registration statement o Public issue - the issue is registered with the SEC a) general cash offer: shares are sold to all interested investors b) right offer: shares are sold to existing shareholders initial public offering (IPO)/unseasoned new issue: first public equity issue that is made by a company always cash offers seasoned new issue: new issue where the company’s securities have been previously issued cash offer or rights offer 19.3 The cash offer if the cash offer is a public one, investment banks are usually involved – financial intermediaries who perform a variety of services 2 basic methods of issuing securities for cash: 1. Firm commitment: the investment banker buys the securities for less than the offering price & accepts the risk of not being able to sell them ( underwrites the securities) to minimize risk, bankers form an underwriting group ( syndicate ) to share risk & help each other compensation : difference between the underwriter’s buying price & the offering price
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This note was uploaded on 11/16/2009 for the course F 3033 taught by Professor Hh during the Spring '09 term at Maastricht.

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Chapter 19 - Issuing securities to the public - Chapter 19...

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