The Initial Public Offering Handbook: a Guide for Entrepreneurs, Executives, Directors and Private Investors
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Trading Frictions and Market Structure: an Empirical Analysis
Trading Frictions and Market Structure: An Empirical Analysis Charlie X. Cai, David Hillier, Robert Hudson, and Kevin Keasey1 February 3, 2005 JEL Classi…cation: G12; G14; D23; L22. Keywords: SETS; SEAQ; Trading Friction; Market Structure. 1 The Authors are from the University of Leeds. Address for correspondence: Charlie X. Cai, Leeds University Business School, Maurice Keyworth Building, The University of Leeds, Leeds LS2 9JT, UK., e-mail: [email protected]. All errors are our own. Trading Frictions and Market Structure: An Empirical Analysis Abstract Market structure a¤ects the informational and real frictions faced by traders in equity markets. We present evidence which suggests that while real fric- tions associated with the costs of supplying immediacy are less in order driven systems, informational frictions resulting from increased adverse selection risk are considerably higher in these markets. Firm value, transaction size and order location are all major determinants of the trading costs faced by investors. Consistent with the stealth trading hypothesis of Barclay and Warner (1993), we report that informational frictions are at their highest for small trades which go through the order book. Finally, while there is no doubt that the total costs of trading on order-driven systems are lower for very liquid securities, the inherent informational ine¢ ciencies of the format should be not be ignored. This is particularly true for the vast majority of small to mid-size stocks that experience infrequent trading and low transac- tion volume. JEL Classi…cation: G12; G14; D23; L22. Keywords: SETS; SEAQ; Trading Friction; Market Structure. 1 Introduction Trading frictions in …nancial markets are an important determinant of the liquidity of securities and the intertemporal e¢ ciency of prices. -
Analysis of Securitized Asset Liquidity June 2017 an He and Bruce Mizrach1
Analysis of Securitized Asset Liquidity June 2017 An He and Bruce Mizrach1 1. Introduction This research note extends our prior analysis2 of corporate bond liquidity to the structured products markets. We analyze data from the TRACE3 system, which began collecting secondary market trading activity on structured products in 2011. We explore two general categories of structured products: (1) real estate securities, including mortgage-backed securities in residential housing (MBS) and commercial building (CMBS), collateralized mortgage products (CMO) and to-be-announced forward mortgages (TBA); and (2) asset-backed securities (ABS) in credit cards, autos, student loans and other miscellaneous categories. Consistent with others,4 we find that the new issue market for securitized assets decreased sharply after the financial crisis and has not yet rebounded to pre-crisis levels. Issuance is below 2007 levels in CMBS, CMOs and ABS. MBS issuance had recovered by 2012 but has declined over the last four years. By contrast, 2016 issuance in the corporate bond market was at a record high for the fifth consecutive year, exceeding $1.5 trillion. Consistent with the new issue volume decline, the median age of securities being traded in non-agency CMO are more than ten years old. In student loans, the average security is over seven years old. Over the last four years, secondary market trading volumes in CMOs and TBA are down from 14 to 27%. Overall ABS volumes are down 16%. Student loan and other miscellaneous ABS declines balance increases in automobiles and credit cards. By contrast, daily trading volume in the most active corporate bonds is up nearly 28%. -
An Assessment of Valuation Methods of Stock Initial Public Offerings on Tehran Stock Exchange
International Journal of Academic Research in Business and Social Sciences 2017, Vol. 7, No. 4 ISSN: 2222-6990 An Assessment of Valuation Methods of Stock Initial Public offerings on Tehran Stock Exchange Mohammad Kheiry 1, Sima Golozar 2,*, Ali Amiri 3 1 Department of Economic, Accounting and Management, Payam Noor University, Tehran, Iran. Kheiry Email: [email protected] 2,* Postgraduate student of Financial Management, Qeshm Institute for Higher Education, Qeshm, Iran. Email: [email protected] 3 Department of Accounting, college of human science, Bandar Abbas, Islamic Azad University, Bandar Abbas, Iran. Email: [email protected] DOI: 10.6007/IJARBSS/v7-i4/2822 URL: http://dx.doi.org/10.6007/IJARBSS/v7-i4/2822 Abstract Every day hundreds of companies all over the world are entering capital market for the first time by issuing stocks. By doing so, they decide to invest capital necessary for continuing activity and expanding operations accordingly. For this reason, it is important to the companies that price specified for their stock demonstrate real value of assets and their growth and development opportunities in the future. The purpose of this research is to study valuation methods of stock initial public offerings at the Tehran Stock Exchange. Population and study sample consisted of firms publicly offered their stocks for the first time at Tehran Stock Exchange during 2009-2014, and experienced no trading halt, i.e. 45 companies of which seven companies were eliminated due to lack of trading on the stock exchange and 38 firms were chosen. The research method is correlational-descriptive and the research is an applied research by purpose. -
Appendix 10 Glossary of Terms Related to Venture Capital and Other Private Equity Or Debt Financing
APPENDIX 10 GLOSSARY OF TERMS RELATED TO VENTURE CAPITAL AND OTHER PRIVATE EQUITY OR DEBT FINANCING 401(K) Plan: A type of qualified retirement plan in which employees make salary-reduced, pre-tax contributions to an employee trust. In many cases, the employer will match employee contributions up to a specified level. - A - Accredited Investor: Rule 501 of the SEC regulations defines an individual accredited investor as: “Any natural person whose individual net worth or joint net worth with that person’s spouse at the time of his purchase exceeds $1,000,000”; OR “Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.” For the complete definition of “accredited investor,” see the SEC web site. Accrued Interest: The interest due on preferred stock or a bond since the last interest payment was made. ACRS: Accelerated Cost Recovery System. The IRS-approved method of calculating depreciation expense for tax purposes. Also known as Accelerated Depreciation. ADR: American Depositary Receipt (ADRs). A security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. markets. Advisory Board: A group of external advisors to a private equity group or portfolio company. Advice provided varies from overall strategy to portfolio valuation. Less formal than a Board of Directors. -
ESG Considerations for Securitized Fixed Income Notes
ESG Considerations for Securitized Fixed Neil Hohmann, PhD Managing Director Income Notes Head of Structured Products BBH Investment Management [email protected] +1.212.493.8017 Executive Summary Securitized assets make up over a quarter of the U.S. corporations since 2010, we find median price declines fixed income markets,1 yet assessments of environmental, for equity of those companies of -16%, and -3% median social, and governance (ESG) risks related to this sizable declines for their corporate bonds.3 Yet, the median price segment of the bond market are notably lacking. decline for securitized notes during these periods is 0% – securitized notes are as likely to climb in price as they are The purpose of this study is to bring securitized notes to fall in price, through these incidents. This should not be squarely into the realm of responsible investing through the surprising – securitizations are designed to insulate inves- development of a specialized ESG evaluation framework tors from corporate distress. They have a senior security for securitizations. To date, securitization has been notably interest in collateral, ring-fenced legal structures and absent from responsible investing discussions, probably further structural protections – all of which limit their owing to the variety of securitization types, their structural linkage to the originating company. However, we find that complexities and limited knowledge of the sector. Manag- a few securitization asset types, including whole business ers seem to either exclude securitizations from ESG securitizations and RMBS, can still bear substantial ESG assessment or lump them into their corporate exposures. risk. A specialized framework for securitizations is needed. -
Regulatory Notice 16-08
Regulatory Notice 16-08 Contingency Offerings February 2016 Private Placements and Public Offerings Subject Notice Type to a Contingency 00 Guidance Executive Summary Suggested Routing FINRA’s review of securities offering documents has revealed instances 00 Compliance in which broker-dealers have not complied with the contingency offering 00 Corporate Finance requirements of Rules 10b-9 and 15c2-4 under the Securities Exchange Act of 00 Legal 1934 (SEA). FINRA is publishing this Notice to provide guidance regarding the 00 Registered Representatives requirements of SEA Rules 10b-9 and 15c2-4 and to remind broker-dealers 00 Senior Management of their responsibility to have procedures reasonably designed to achieve 00 compliance with these rules. 1 Syndicate 00 Underwriting Questions regarding this Notice should be directed to: 00 Joseph E. Price, Senior Vice President, Corporate Financing/Advertising Key Topics Regulation, at (240) 386-4623 or [email protected]; 00 Bona Fide Purchases 00 00 Paul Mathews, Vice President, Corporate Financing, at (240) 386-4639 Contingency Offerings or [email protected]; or 00 Escrow 00 00 Josh Bandes, Senior Investigator, Corporate Financing, at (240) 386-5431 Net Capital or [email protected]. 00 Underwriting Background & Discussion Referenced Rules & Notices 00 Broker-dealers that participate in best efforts public and private securities FINRA Rule 2010 offerings that have a contingency (i.e., an underlying condition or qualification 00 Notice to Members 84-7 that must take place by a specified date prior to the issuer taking possession 00 Notice to Members 84-64 of the offering proceeds) must safeguard investors’ funds they receive until 00 Notice to Members 87-61 the contingency is satisfied. -
Initial Public Offerings
November 2017 Initial Public Offerings An Issuer’s Guide (US Edition) Contents INTRODUCTION 1 What Are the Potential Benefits of Conducting an IPO? 1 What Are the Potential Costs and Other Potential Downsides of Conducting an IPO? 1 Is Your Company Ready for an IPO? 2 GETTING READY 3 Are Changes Needed in the Company’s Capital Structure or Relationships with Its Key Stockholders or Other Related Parties? 3 What Is the Right Corporate Governance Structure for the Company Post-IPO? 5 Are the Company’s Existing Financial Statements Suitable? 6 Are the Company’s Pre-IPO Equity Awards Problematic? 6 How Should Investor Relations Be Handled? 7 Which Securities Exchange to List On? 8 OFFER STRUCTURE 9 Offer Size 9 Primary vs. Secondary Shares 9 Allocation—Institutional vs. Retail 9 KEY DOCUMENTS 11 Registration Statement 11 Form 8-A – Exchange Act Registration Statement 19 Underwriting Agreement 20 Lock-Up Agreements 21 Legal Opinions and Negative Assurance Letters 22 Comfort Letters 22 Engagement Letter with the Underwriters 23 KEY PARTIES 24 Issuer 24 Selling Stockholders 24 Management of the Issuer 24 Auditors 24 Underwriters 24 Legal Advisers 25 Other Parties 25 i Initial Public Offerings THE IPO PROCESS 26 Organizational or “Kick-Off” Meeting 26 The Due Diligence Review 26 Drafting Responsibility and Drafting Sessions 27 Filing with the SEC, FINRA, a Securities Exchange and the State Securities Commissions 27 SEC Review 29 Book-Building and Roadshow 30 Price Determination 30 Allocation and Settlement or Closing 31 Publicity Considerations -
The CEO's Guide to Corporate Finance
CORPORATE FINANCE PRACTICE The CEO’s guide to corporate finance Richard Dobbs, Bill Huyett, and Tim Koller Artwork by Daniel Bejar Four principles can help you make great financial decisions— even when the CFO’s not in the room. The problem Strategic decisions can be com- plicated by competing, often spurious notions of what creates value. Even executives with solid instincts can be seduced by the allure of financial engineering, high leverage, or the idea that well-established rules of eco- nomics no longer apply. Why it matters Such misconceptions can undermine strategic decision making and slow down economies. What you should do about it Test decisions such as whether to undertake acquisitions, make dives- titures, invest in projects, or increase executive compensation against four enduring principles of corporate finance. Doing so will often require managers to adopt new practices, such as justifying mergers on the basis of their impact on cash flows rather than on earnings per share, holding regular business exit reviews, focusing on enterprise-wide risks that may lurk within individual projects, and indexing executive compensation to the growth and market performance of peer companies. 3 The CEO’s guide to corporate finance It’s one thing for a CFO to understand the technical methods of valuation—and for members of the finance organization to apply them to help line managers monitor and improve company performance. But it’s still more powerful when CEOs, board members, and other non- financial executives internalize the principles of value creation. Doing so allows them to make independent, courageous, and even un- popular business decisions in the face of myths and misconceptions about what creates value. -
Aritzia Announces $330 Million Secondary Offering of Subordinate
NEWS RELEASE Aritzia Announces $330 Million Secondary Offering of Subordinate Voting Shares and Concurrent Share Repurchase of $107 Million of Subordinate Voting Shares and Multiple Voting Shares from Berkshire Partners NOT FOR DISTRIBUTION IN THE UNITED STATES Berkshire Partners Completes Sale of Remaining Interest VANCOUVER, February 19, 2019 /PRNewswire/ - Aritzia Inc. ("Aritzia" or the "Company") (TSX: ATZ), a vertically integrated, innovative design house of exclusive fashion brands, today announced that certain shareholders, including an investment vehicle managed by Berkshire Partners LLC, a Boston-based private equity firm (“Berkshire Shareholder”) and 8317640 Canada Inc., an entity indirectly controlled by Aldo Bensadoun, a director of Aritzia (the “Bensadoun Shareholder” and together with the Berkshire Shareholder, the “Selling Shareholders”), have entered into an agreement with a syndicate of underwriters led by CIBC Capital Markets, RBC Capital Markets and TD Securities Inc. (the “Underwriters”), pursuant to which the Underwriters have agreed to purchase on a bought deal basis an aggregate of 19,505,000 subordinate voting shares of the Company (“Shares”) held by the Selling Shareholders at an offering price of $16.90 per Share (the “Offering Price”) for total gross proceeds to the Selling Shareholders of $329,634,500 (the “Offering”). Aritzia will not receive any proceeds from the Offering. The Company also announced today that it has agreed to purchase, directly or indirectly, the equivalent of 6,333,653 Shares for cancellation from the Berkshire Shareholder (the “Share Repurchase”). The purchase price to be paid by the Company under the Share Repurchase will be the same as the Offering Price, for gross proceeds to the Berkshire Shareholder of $107,038,736 from the Share Repurchase. -
Fairness Opinions Under Fire by Bret A
Fairness Opinions Under Fire By Bret A. Tack Los Angeles Office A renewed market for mergers and acquisitions (and growing value of the deals) is focusing fresh attention on the fairness opinions boards seek before approval. In our post-scandal business environment, the problems with fairness opinions, including conflicts of interest and potential manipulation, have drawn new criticism. How can boards assure the "fairness" of their fairness opinions. As the value of transactions requiring fairness opinions has surged, they have come under increased scrutiny because of systemic problems that undermine their credibility. The perception among many in the investment community is that fairness opinions are of dubious value as an independent assessment of whether a transaction is fair. Their only real purpose, it seems, is to protect fiduciaries in the event of a lawsuit. Concerns over fairness opinions have attracted the attention of regulatory bodies such as the NASD, the Securities and Exchange Commission and New York Attorney General Eliot Spitzer. The potential conflict of provider "success fees" is only one problem with fairness opinions. In truth, there are no coherent guidelines used by fairness opinion providers. Foremost on the regulators' list of concerns is the obvious conflict of interest that exists when the firm issuing the fairness opinion stands to earn a "success fee" upon consummation of the transaction. However, such conflicts are only one of the factors undermining fairness opinions. The most basic problem is that there is no coherent set of guidelines for fairness opinion providers to follow in assessing and demonstrating the financial fairness of a transaction. -
Registration Statement Under Securities Act of 1933
UNITED STATES SECURITIES AND EXCHANGE COMMISSION OMB APPROVAL OMB Number: 3235-0065 Washington, D.C. 20549 Expires: October 31, 2021 Estimated average burden FORM S-1 hours per response ............653.54 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number) (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) (Name, address, including zip code, and telephone number, including area code, of agent for service) (Approximate date of commencement of proposed sale to the public) If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. -
Outside Financing Capacity
Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions (1) An entrepreneur (borrower). An investment project requiring fixed investment I. The entrepreneur has cash on hand (or liquid securities) A < I. To implement the project the entrepreneur needs (borrows) I − A. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions (2) If undertaken the project either succeeds: verifiable income R > 0. Or the project fails: yields zero income. Let p denote the probability of success. The project is subject to moral hazard. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions(3) The entrepreneur can exert high effort (work, take no private benefit), or zero effort (shirk, take a private benefit). Equivalently, the entrepreneur chooses between project with high or low probability of success. High effort yields p = pH ; low effort yields p = pL, with pL < pH . Denote ∆p = pH − pL. Low effort yields a private benefit B > 0 to the entrepreneur. (B can be interpreted as a disutility of effort). Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions (4) Borrower and lenders (investors) are risk-neutral. For simplicity, there is no time preference: investors require an interest rate equal to 0 (at least). The entrepreneur is protected by limited liability (income cannot be negative). Competition among lenders drive interest and profit to zero. Robert J. Gary-Bobo Introduction Tirole’s Simple Credit Rationing Model Equity Multiplier Theory of Standard Debt Contracts Basic Assumptions(5) The loan contract specifies how the profit is shared between borrower and lenders.