公司金融_Raising Capital

北京大学汇丰商学院 公司金融 课件

Class 10

Raising Capital

1

Daniel Sungyeon Kim Peking University HSBC Business School

北京大学汇丰商学院 公司金融 课件

Proceeds from Common Stock

Proceeds from Preferred Stock

Years Issues (mils) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 19,153.3 56,016.1 72,517.8 102,394.8 61.436.8 81,977.5 115,455.9 120,162.3 114,960.1 164.263.4 189.067.6

# of Issues 402 868 1087 1489 1053 1175 1617 1365 971 1028 884

Issues (mils) 4,696.4 19,881.8 29,317.9 28,442.4 15,466.9 15,083.0 36,472.5 33,268.4 37,760.3 27,483.1 15,397.1

# of Issues 88 152 282 373 114 122 177 254 229 173 772

北京大学汇丰商学院 公司金融 课件

1950

1970

1990

1999

Equities held by U.S. pensions Equities held by all U.S. institutions

1% 6%

9% 27%

25% 43%

25% 50%

(banks, mutual funds, hedge funds, insurance companies)

北京大学汇丰商学院 公司金融 课件

US Japan UK France Germany Canada Switzerland Netherlands Italy Sweden Australia Hong Kong Mexico Korea Taiwan South Africa Singapore Brazil Greece Malaysia

10,547

2,394 1,903 1,014 760 543 524 488 387 272 244 195 109 107 103 93 90 88 62 58

北京大学汇丰商学院 公司金融 课件

Management gets the approval of the board. The amount of money to be raised and the type of securities to be

issued Select underwriters., i.e., investment banks (generally IBs form a syndicate) Negotiate contracts with underwriters The firm prepares and files a registration statement with the

Securities and Exchange Commission (SEC).business information

The registration statement contains all relevant financial and

北京大学汇丰商学院 公司金融 课件

The SEC studies the registration statement during the waiting

period.

Firm distribute prospectus to potential investors (buyers) during this period The waiting period is generally 20 days unless a letter of comment sent by the SEC suggesting changes.

If everything is ok with the SEC, a price is set and a full-fledged

selling effort gets underway.

Intensive research and analysis are required for setting the offering price, especially for IPOs.

北京大学汇丰商学院 公司金融 课件

Steps in Public Offering 1. Pre-underwriting conferences 2. Registration statements 3. Pricing the issue 4. Public offering and sale 5. Market stabilization Several months 20-day waiting period Usually on the 20th day

Time

After the 20th day 30 days after offering

北京大学汇丰商学院 公司金融 课件

北京大学汇丰商学院 公司金融 课件

There are two kinds of public issues: The general cash offer: cash offers are sold to all interested

investors. The rights offer: rights offers are sold to existing shareholders only. Almost all debt is sold in general cash offerings, and equity is

sold by both cash offer and the rights offer.

北京大学汇丰商学院 公司金融 课件

There are three methods for issuing securities for cash: Firm Commitment Best Efforts Dutch Auction

There are two methods for selecting an underwriter Competitive Negotiated

北京大学汇丰商学院 公司金融 课件

The issuing firm sells the entire issue to the underwriting

syndicate.

The syndicate then resells the issue to the public. The underwriter makes money on the spread between the

price paid to the issuer and the price received from investors when the

stock is sold.

It is the underwriter syndicate that bears the risk of not being

able to sell the entire issue for more than the cost.States.

This is the most common type of underwriting in the United

北京大学汇丰商学院 公司金融 课件

Underwriter must make their “best effort” to sell the securities

at an agreed-upon offering price.

It is the company (issuer) that bears the risk of the issue not

being sold.

The offer may be pulled if there is not enough interest at the

offer price. The company does not get the capital, and it has still incurred substantial flotation costs.

This type of underwriting is not as common as it used to be.

北京大学汇丰商学院 公司金融 课件

Underwriter accepts a series of bids that include number of

shares and price per share

The price that everyone pays is the highest price that will result

in all shares being sold

The Treasury has used Dutch auctions for years. Google was the first large Dutch auction IPO in the U.S.

北京大学汇丰商学院 公司金融 课件

Investment banks are at the heart of new security issues. They

provide advice, market the securities, and underwrite the proceeds. Certification: assures investors that the offer price is fair Monitoring: IBs can less costly monitor issues Marketing: find investors to sell securities Risk bearing: firm commitment

IBs play four main functions

北京大学汇丰商学院 公司金融 课件

IPO underpricing is also called initial return. First Day Closing Price - Of f er Price IPO Underpric ing Of f er Price It is difficult to price an IPO because there is

not a current market price available. Private companies tend to have more asymmetric information problem than companies that are already publicly traded. No mandatory disclosure requirements No price information available Less media attention

北京大学汇丰商学院 公司金融 课件

Underwriters (IBs) want to ensure that, on average, their clients

earn a good return on IPOs.

However, underpricing causes the issuer to “leave money on

the table.”

Example Suppose the offer price is $10 per share and the firm issues 10

million shares to the public. At the first trade, the stock price rises to $12 per share. What is the IPO underpricing? How much “money was left on the table”?