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9.The Gramm-Leach-Bliley Act of 1999 (also known as the Financial Modernization Act) removed the effects of the Glass-Steagall act, allowing commercial banks and investment banks to form large universal banks with the hopes that the size would create a more stable business model, regardless of the economic environment. 10. League tables are records of all the underwriting participations of every bank. It serves as a way to compare the performances of competing banks in certain underwriting capabilities, and there is a league table for every type of security and geographic region.11. The Equity Capital Market group advises companies on whether an IPO would be a logical business decision for them. The group would then help determine if there is enough investor demand for the new securities and then work out the expected value of the firm through common valuation methods. The equity capital markets
Investment Banking Final | Stowellgroup would work with the investment banking division (which conducts the valuations) as well as the sales & trading division that will handle equity transactions to investors. They indirectly work with institutional clients as well as the issuing companies themselves. 12. Google had used a Dutch auction in its IPO. In this process, they rank potential investors by price willing to pay and number of shares willing to buy. Once they have reached the number they need to issue, they cut it there, use the lowest price, and issue to these investors at this price. The advantages of a Dutch auction are that it guarantees the greatest distribution to retail investors, and also avoids excesses that can occur in large IPOs, particularly the large first-day pop in a stock’s price. However, this may alienate certain large institutional investors and disenfranchises their price inputs, and also removes the opportunity to receive large allocation directed by the book-runner. The commissions received by the investment bankers in the underwriting will be significantly less. 13. The company is barely investment grade rating, and so must take into consideration the debt structure of the company that it is looking at acquiring. When considering funding the acquisition with debt, the company will need to determine how much debt it is capable of taking on, since an increase in debt may cause the debt offering to become noninvestment grade. If the company is considering an equity funding, then it must consider dilutive effects of the equity offering, and the loss in shareholder. If the company would like to fund the acquisition with convertible securities, it must consider whether it would be better to issue optionally converting convertibles or mandatorily converting convertibles. This is important since, from a credit agency point of view, the optionally converting convertible will exhibit bond-type characteristics, which may reduce the credit rating, whereas the mandatorily converting convertible will exhibit more equity-type characteristics.