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Introduction
Financial
And
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The
of the offering
2. Buying the securities from the issuer
3. Distributing the issue to the public
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The
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The
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GROSS
SPREAD/UNDERWRITER DISCOUNT: A
fee earned from underwriting the security is the difference
between the price paid to the issuer and the price at which
the investment bank reoffers the security to the public.
There are numerous factors that effect the size of the
gross spread. Typical gross spreads of the common stock
offerings, initial public offerings and bond offerings are
shown in table 14.1.
IPOs are typically common stock offerings of the
companies that have previously not issued their common
stock to the public.
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The
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To realize
Investment Bankers
Investment
Commercial Banks
Security Houses
Prior
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The
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Just
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Prospectus
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During
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In
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BOUGHT DEAL:
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Mechanics
of Bought Deal:
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AUCTION
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It
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Mechanics
of Auction Process:
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Bidders
Bid
$150
5.1%
110
5.2
90
5.2
100
5.3
75
5.4
25
5.4
80
5.5
70
5.6
85
5.7
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The
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In
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In
Another
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PREEMPTIVE
RIGHTS OFFERING: A
corporation can issue new common stock directly to
existing shareholders via a preemptive rights
offering.
A preemptive right grants existing shareholders the
right to buy some proportion of the new shares
issued at a price below market value.
The price at which new shares can be purchased is
called the subscription price.
In US, the practice of issuing common stock via a
preemptive rights offering is uncommon.
Rule 144A
In
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