Corporate Finance Team
Public Companies
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Companies raise money
Fixed Assets/Working Capital
Two types of money – debt and equity
Venture Capitalists
Private Equity and leveraged buyouts
Public and Private
Corporate Finance
Initial Public Offering
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Flotation on the market
Private to Public
Availability of shares
Select number of shareholders to general availability
Investment Banking’s Role
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Advice
Place shares in the hands of investors
Channel capital
Allocation of capital
Which Market?
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London Stock Exchange
‘Senior Market’
Business for at least three years
Nominated Advisor
Alternative Investment Market (AIM)
‘Junior Market’
Smaller companies
Nomad
Other Markets
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‘Small Cap’ Stocks
Closely held
Family business
Partnership Businesses
Football Clubs
Sporting Institutions
Underwriting
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Good prospects for investment
Favorable state of the market
Current affairs causing uncertainty
Nervous markets
For a fee, an outside institution will buy unwanted
shares
• Confidence
Stock Exchange
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Attract profitable companies
Interesting marketplace
Ensure information is current
Up-to-date knowledge
Accurate knowledge
Trust in the exchange
Stock Exchange
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Prospectus
Detailed financial information
Information about circulars to its shareholders
Fair trading of shares
Insider Dealing
Transparency
Perfect market knowledge
Listing
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Broker
Stock Exchange Member Firm
Sponsor and publish its prospectus
History and Projections
Financial Information every three months
Notify the exchange of changes
Listing
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Pre-float preparation – takes months
Legal verification
Projected cashflow projection
Asset valuations
Subscription Agreement - Underwriting
Price range prospectus
Book-building process – potential investors
Types of Listing
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Introduction
25% are already in the public domain
No new shares are listed
No underwriting required
Cheapest way of listing
Types of Listing
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Placing or Private Offering
Selective
Institutional Investors
Low costs
Narrow Shareholder Base
Types of Listing
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Intermediaries
Allocated to stock exchange member firms
Selected by sponsor
Wide spread of investors
Types of Listing
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Public Offer
Private Investors
Institutional Investors
Expensive – bank fees for underwriting
Offer for Sale – shares already in issue
Offer for Subscription – New shares
Tender offer – auction basis over minimum price
Dutch Auction – prices reduced until taken up by a bidder
Trading Shares
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Continuous Double Auction
Buyers and sellers – bid and offer prices
Notifying the exchange
How many shares bought and sold
Price of shares
Wild price fluctuations are monitored
The Company
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How many shares to sell
Founder’s shares – ‘lock-in period’
Confidence in the company
Additional equity capital
Raise additional funding
Key Dates
Impact Day
• Prospectus is published.
• Approved by the FCA
Admission
• Official List
• Admission Week - applications and cash received
• Selling at a premium or selling at a discount?
Issues
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Rights Issues
Fresh shares must be offered to existing shareholders
Right of pre-emption – first refusal
Dilution of shares
Deep Discount Issue to existing shareholders
‘Rump’ – left over shares - lapsed securities sold by
broker to the market
What Happens Next
• Transaction Disclosure – public domain
• Disclosure of price-sensitive information through an
RIS (Regulatory Information Service)
• Approved screen-based news service – Bloomberg,
Reuters
• Observing the Model Code: Directors cannot trade in
the two months before a company’s annual results
The benefits
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Take over other companies
Buying with their own shares
Access to the cheapest form of borrowing
Bond Markets