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1、,Chapter 16,PrinciplesofCorporateFinanceNinth Edition,How Corporations Issue Securities,Topics Covered,Venture CapitalThe Initial Public OfferingOther New-Issue ProceduresSecurity Sales by Public CompaniesRights IssuePrivate Placements and Public Issues,Venture Capital,Venture CapitalMoney invested
2、to finance a new firm,Venture Capital,Private financing for relatively new businesses in exchange for equityThe company should have an“exit”strategySell the company VC benefits from proceeds from saleTake the company public VC benefits from IPOMany VC firms are formed from a group of investors that
3、pool capital and then have partners in the firm decide which companies will receive financingSome large corporations have a VC division,15-4,Venture Capital,Venture Capital,U.S.Venture Capital Investments,Motives For An IPO,Percent of CFOs who strongly agree with the reason for an IPO,Initial Offeri
4、ng,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.Prospectus-Formal summary that provides information on an issue of securities.Spread-Difference between public offer price and p
5、rice paid by underwriter.Underpricing-Issuing securities at an offering price set below the true value of the security.,Selling Securities to the Public,Management must obtain permission from the Board of DirectorsFirm must file a registration statement with the SECThe SEC examines the registration
6、during a 20-day waiting periodA preliminary prospectus,called a red herring,is distributed during the waiting periodIf there are problems,the company is allowed to amend the registration and the waiting period starts overSecurities may not be sold during the waiting periodThe price is determined on
7、the effective date of the registration,15-10,墓碑式广告的例子,The Top Managing Underwriters,Underwriters,Services provided by underwritersFormulate method used to issue securitiesPrice the securitiesSell the securitiesSyndicate group of investment bankers that market the securities and share the risk associ
8、ated with selling the issueSpread difference between what the syndicate pays the company and what the security sells for initially in the market,15-13,Average Initial IPO Returns,Initial Offering,Average Expenses on 1767 IPOs from 1990-1994,IPO Proceeds,IPO Proceeds and First Day Returns,General Cas
9、h 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 of the same security
10、.Private Placement-Sale of securities to a limited number of investors without a public offering.,Underwriting Spreads(2006),Rights Issue,Rights Issue-Issue of securities offered only to current stockholders.Example BNP Paribas Bank needs to raise 5.50 billion of new equity.The market price is 77.40
11、/sh.Lafarge decides to raise additional funds via a 1 for 10 rights offer at 65.40 per share.If we assume 100%subscription,what is the value of each right?,Rights Issue,Current Market Value=10 x 77.40=774.00 Total Shares=10+1=11Amount of funds=774+65.40=839.40New Share Price=(839.40)/11=76.31Value o
12、f a Right=76.31 65.40=10.91,Example-BNP Paribas Bank needs to raise 5.50 billion of new equity.The market price is 77.40/sh.Lafarge decides to raise additional funds via a 1 for 10 rights offer at 65.40 per share.If we assume 100%subscription,what is the value of each right?,Rights Issue,Slightly Mo
13、re Difficult Example Lafarge Corp needs to raise 1.28billion of new equity.The market price is 60/sh.Lafarge decides to raise additional funds via a 4 for 17 rights offer at 41 per share.If we assume 100%subscription,what is the value of each right?,Rights Issue,Current Market Value=17 x 60=1,020 To
14、tal Shares=17+4=21Amount of funds=1,020+(4x41)=1,184New Share Price=(1,184)/21=56.38Value of a Right=56.38 41=15.38,Example-Lafarge Corp needs to raise 1.28billion of new equity.The market price is 60/sh.Lafarge decides to raise additional funds via a 4 for 17 rights offer at 41 per share.If we assume 100%subscription,what is the value of each right?,
