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1、,Irwin/McGraw-Hill,Chapter 14,Fundamentals of Corporate FinanceThird Edition,How Corporations Issue Securities,Brealey Myers Marcusslides by Matthew Will,Irwin/McGraw-Hill,The McGraw-Hill Companies, Inc.,2001,Topics Covered,Venture CapitalThe Initial Public OfferingThe UnderwritersGeneral Cash Offer
2、sThe Private Placement,Venture Capital,Since success of a new firm is highly dependent on the effort of the managers, restrictions are placed on management by the venture capital company and funds are usually dispersed in stages, after a certain level of success is achieved.,Venture CapitalMoney inv
3、ested to finance a new firm,Venture Capital,Venture Capital,Initial Offering,Initial Public Offering (IPO) - First offering of stock to the general public.Underwriter - Firm that buys an issue of securities from a company and resells it to the public.Spread - Difference between public offer price an
4、d price paid by underwriter.Prospectus - Formal summary that provides information on an issue of securities.Underpricing - Issuing securities at an offering price set below the true value of the security.,Initial Offering,Average Expenses on 1767 IPOs from 1990-1994,The Underwriters,The Underwriters
5、,General Cash Offers,Seasoned Offering - Sale of securities by a firm that is already publicly traded. General Cash Offer - Sale of securities open to all investors by an already public company.Shelf Registration - A procedure that allows firms to file one registration statement for several issues o
6、f the same security.Private Placement - Sale of securities to a limited number of investors without a public offering.,Rights Issue,Rights Issue - Issue of securities offered only to current stockholders.Example - YRU Corp currently has 9 million shares outstanding. The market price is $15/sh. YRU d
7、ecides to raise additional funds via a 1 for 3 rights offer at $12 per share. If we assume 100% subscription, what is the value of each right?,Rights Issue,Current Market Value = 9 mil x $15 = $135 milTotal Shares = 9 mil + 3 mil = 12 milAmount of new funds = 3 mil x $12 = $36 milNew Share Price = (
8、136 + 36) / 12 = $14.25/shValue of a Right = 15 - 14.25 = $0.75,Example - YRU Corp currently has 9 million shares outstanding. The market price is $15/sh. YRU decides to raise additional funds via a 1 for 3 rights offer at $12 per share. If we assume 100% subscription, what is the value of each right?,