Lecture8 - raising capital debt equity covenants

20 dual class shares in practice magna international

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Unformatted text preview: s other chief executives were estimated at 95.2% of Hollinger’s entire adjusted net income during 1997-2003, a sum in excess of $400 million. 20 Dual-Class Shares in Practice Magna International Inc. (CA), has Class B shares Magna carrying 500 votes for every one Class A share vote. Magna’s founder and Chairman maintain control over the company with just 3.4% of the company’s equity! In the Google (USA) IPO, each of the class-B shares reserved for insiders would carry 10 votes, while ordinary class-A shares sold to the public would get just one vote. class-A Other examples: USA: Ford Motors, Tyson Foods, Berkshire Hathaway, USA: Comcast, the New York Times Co. Canada: Bombardier, Rogers, Shaw, Alliance Atlantis, Telus Corp., Quebecor, and Onex Corp. Telus 21 Preferred Stock Preferred stock differs from common stock in that: – dividends must be paid before dividends on common stock – iin the event of liquidation, preferred stock is senior to n common stock (but junior to debt) common – iits dividend is fixed at the time of the sale. Unpaid ts dividends accumulate. Looks like fixed-income dividends – sometimes it has a maturity – iissuing this debt-like security does not affect bond ratings ssuing debt-like Convertible preferred stock can be converted into common stock by the holder common Adjustable-rate preferred stock has a dividend that is adjusted quarterly based on changes in short-term interest rates interest 22 Warrants Warrants are long-term call options on the firm’s stock call However, unlike an option, an instrument of the stock However, exchange, a warrant is issued by a company. Warrants are often included as part of a unit offering, unit which includes two securities in one package. which Bundling one share and one warrant on the firm’s stock Bundling can serve as staged financing: investors can invest more by exercising the option if the firm is successful. by Bundling a bond with a warrant gives rise to convertible Bundling debt debt 23 Private Equity Private equity is equity that is not registered with the Private OSC/SEC and cannot be traded on public markets OSC/SEC Individuals and firms hold private equity in small private Individuals businesses businesses There are also institutions that provide private equity: Institutions specialized in venture capital provide Institutions venture financing for new, risky companies financing Institutions specialized in restructuring provide financing Institutions restructuring for mature firms that make important changes in the way they do business (e.g., Kohlberg Kravis Roberts & Co.) they 24...
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