Equity Capital Markets & IPOs

The lead bank responsible for managing investorA person or organisation that commits capital with the expectation of a financial return. orders and pricing in a securities offering.

Example: The bookrunner builds the order bookA record of outstanding buy and sell orders arranged by price and often time priority. for a bond issue.

Bookrunner is the lead bank responsible for managing investor orders and pricing in a securities offering; the economic meaning of the transaction should be traced to per-share cash flows, voting or distributionIncome or realised gains paid by a fund to its unitholders. rights and the effect on the company's capital structureThe mix and ranking of a company's debt, preferred securities, and equity financing..

The bookrunner builds the order book for a bond issue. The numbers make the ownership consequence visible; they should then be connected to earnings, cash flow and the number of shares outstandingThe total shares currently held by all shareholders, excluding shares retired by the company..

The practical test for Bookrunner is whether it improves future cash flow per share after considering the price paid, financing used and new risks assumed; growth in total profit does not create value if dilutionA reduction in an existing holder's ownership percentage after new securities are issued. causes profit per share to fall.

An additional public share sale by a company that is already listed.

Example: A listed manufacturer raises money for a new factory through a follow-on offering.

Follow-On Offering is an additional public share sale by a company that is already listed; the transaction can change an investor's ownership percentage, claim on future earnings or route to liquidityThe ease and speed with which an investment can be converted into cash without a major price concession. even when the underlying business has not changed immediately.

A listed manufacturer raises money for a new factory through a follow-on offering.

Evaluate Follow-On Offering with both company and shareholderA person or entity that owns one or more shares in a company. arithmetic: total value, shares outstanding, value per share, cash paid or raised, and the effect on future earnings; corporate actions can transfer value without creating it.

The first public sale of a private company's shares, after which the shares may trade on an exchange.

Example: A technology company raises new capital by selling shares to the public through an IPO.

Initial Public Offering is the first public sale of a private company's shares, after which the shares may trade on an exchange. The transaction can change an investor's ownership percentage, claim on future earnings or route to liquidity even when the underlying business has not changed immediately.

A technology company raises new capital by selling shares to the public through an IPO. The numbers make the ownership consequence visible; they should then be connected to earnings, cash flow and the number of shares outstanding.

Evaluate Initial Public Offering with both company and shareholder arithmetic: total value, shares outstanding, value per share, cash paid or raised, and the effect on future earnings; corporate actions can transfer value without creating it.

The institution that structures and coordinates a financing transaction.

Example: A lead arranger organises lenders for an infrastructure loan.

Lead Arranger is the institution that structures and coordinates a financing transaction; separate company performance from share-price performance: the business creates earnings and cash flow, while the market decides the multiple paid for them.

A lead arranger organises lenders for an infrastructure loan. The numbers make the ownership consequence visible; they should then be connected to earnings, cash flow and the number of shares outstanding.

Read the formal announcement or offer documentAn approved disclosure document provided when an investment product is offered to investors. for Lead Arranger; confirm the dates, ratios, price, treatment of fractions, tax and action required from the shareholder. Growth in total profit does not create value if dilution causes profit per share to fall.

An intermediary that helps an issuer or fund raise money from private investors.

Example: A placement agent introduces a private-equity fund to pension investors.

Placement Agent is an intermediary that helps an issuer or fund raise money from private investors; the transaction can change an investor's ownership percentage, claim on future earnings or route to liquidity even when the underlying business has not changed immediately.

A placement agent introduces a private-equity fund to pension investors.

Placement Agent concerns ownership in a business or a transaction that changes that ownership; shareholder value ultimately depends on cash generation, reinvestmentUsing distributions or proceeds to buy additional units instead of receiving cash., financing and the price paid. Corporate actions can transfer value without creating it.

For Placement Agent, inspect the company's filings, per-share effect, cash-flow consequence, dilution, control rights, eligibility dates and the board's stated rationale; a rising share priceThe market price at which one share is quoted or traded. can coexist with deteriorating business value, and the reverse can also occur.

A sale of newly issued securities in which the issuer receives the proceeds.

Example: A bank issues new shares to strengthen its capital base.

Primary Offering is a sale of newly issued securities in which the issuer receives the proceeds; the transaction can change an investor's ownership percentage, claim on future earnings or route to liquidity even when the underlying business has not changed immediately.

A bank issues new shares to strengthen its capital base.

The practical test for Primary Offering is whether it improves future cash flow per share after considering the price paid, financing used and new risks assumed.

A sale of securities to a limited group of selected investors rather than the general public.

Example: A pension fundA pool of retirement assets invested on behalf of members or beneficiaries. buys newly issued sharesShares that a company has formally created and allocated to shareholders. through a private placement.

Private Placement is a sale of securities to a limited group of selected investors rather than the general public; the economic meaning of the transaction should be traced to per-share cash flows, voting or distribution rights and the effect on the company's capital structure.

A pension fund buys newly issued shares through a private placement.

Evaluate Private Placement with both company and shareholder arithmetic: total value, shares outstanding, value per share, cash paid or raised, and the effect on future earnings; corporate actions can transfer value without creating it.

A sale of existing securities by current holders, so the issuer generally does not receive the proceeds.

Example: An early investor sells part of its stake to the public after the IPO.

Secondary Offering is a sale of existing securities by current holders, so the issuer generally does not receive the proceeds; the economic meaning of the transaction should be traced to per-share cash flows, voting or distribution rights and the effect on the company's capital structure.

An early investor sells part of its stake to the public after the IPO.

Read the formal announcement or offer document for Secondary Offering; confirm the dates, ratios, price, treatment of fractions, tax and action required from the shareholder.

A group of financial institutions working together to distribute or underwrite an offering.

Example: Several banks form a syndicate for a large IPO.

Syndicate is a group of financial institutions working together to distribute or underwrite an offering; the transaction concerns ownership in a business or a transaction that changes that ownership. Shareholder value ultimately depends on cash generation, reinvestment, financing and the price paid.

Several banks form a syndicate for a large IPO.

Evaluate Syndicate with both company and shareholder arithmetic: total value, shares outstanding, value per share, cash paid or raised, and the effect on future earnings; growth in total profit does not create value if dilution causes profit per share to fall.

A firm that helps structure and sell a securities offering and may commit to purchase unsold securities.

Example: The underwriter buys the issue from the company and resells it to investors.

Underwriter is a firm that helps structure and sell a securities offering and may commit to purchase unsold securities; separate company performance from share-price performance: the business creates earnings and cash flow, while the market decides the multiple paid for them.

For example, the underwriter buys the issue from the company and resells it to investors.

Evaluate Underwriter with both company and shareholder arithmetic: total value, shares outstanding, value per share, cash paid or raised, and the effect on future earnings; the market may price an expected event before the formal announcement.