财务管理课件chap015.ppt

Raising CapitalChapter 1515.1Key Concepts and SkillsnUnderstand the venture capital market and its role in financing new businessesnUnderstand how securities are sold to the public and the role of investment bankersnUnderstand initial public offerings and the costs of going public15.2Chapter OutlinenThe Financing Life Cycle of a Firm:Early-Stage Financing and Venture CapitalnSelling Securities to the Public:The Basic ProcedurenAlternative Issue MethodsnUnderwritersnIPOs and UnderpricingnNew Equity Sales and the Value of the FirmnThe Cost of Issuing SecuritiesnIssuing Long-Term DebtnShelf Registration15.3Venture CapitalnPrivate financing for relatively new businesses in exchange for stocknUsually entails some hands-on guidancenThe ultimate goal is usually to take the company public and the VC will benefit from the capital raised in the IPOnMany VC firms are formed from a group of investors that pool capital and then have partners in the firm decide which companies will receive financingnSome large corporations have a VC division15.4Choosing a Venture CapitalistnLook for financial strengthnChoose a VC that has a management style that is compatible with your ownnObtain and check referencesnWhat contacts does the VC have?nWhat is the exit strategy?15.5Selling Securities to the PublicnManagement must obtain permission from the Board of DirectorsnFirm must file a registration statement with the SECnSEC examines the registration during a 20-day waiting periodnA preliminary prospectus,called a red herring,is distributed during the waiting periodnIf there are problems the company is allowed to amend the registration and the waiting period starts overnSecurities may not be sold during the waiting periodnThe price is determined on the effective date of the registration 15.6Table 15.115.7UnderwritersnServices provided by underwritersnFormulate method used to issue securitiesnPrice the securitiesnSell the securitiesnPrice stabilization by lead underwriternSyndicate group of investment bankers that market the securities and share the risk associated with selling the issuenSpread difference between what the syndicate pays the company and what the security sells for in the market15.8Firm Commitment UnderwritingnIssuer sells entire issue to underwriting syndicatenThe syndicate then resells the issue to the publicnThe underwriter makes money on the spread between the price paid to the issuer and the price received from investors when the stock is soldnThe syndicate bears the risk of not being able to sell the entire issue for more than the costnMost common type of underwriting in the United States15.9Best Efforts UnderwritingnUnderwriter must make their“best effort”to sell the securities at an agreed-upon offering pricenThe company bears the risk of the issue not being soldnThe offer may be pulled if there is not enough interest at the offer price and the company does not get the capital and they have still incurred substantial flotation costsnNot as common as it used to be15.10Green Shoes and LockupsnGreen Shoe provisionnAllows syndicate to purchase an additional 15%of the issue from the issuernAllows the issue to be oversubscribednProvides some protection for the lead underwriter as they perform their price stabilization functionnLockup agreementsnRestriction on insiders that prevents them from selling their shares of an IPO for a specified time periodnThe lockup period is commonly 180 daysnThe stock price tends to drop when the lockup period expires due to market anticipation of additional shares hitting the street15.11IPO UnderpricingnInitial Public Offering IPOnMay be difficult to price an IPO because there isnt a current market price availablenAdditional asymmetric information associated with companies going publicnUnderwriters want to ensure that their clients earn a good return on IPOs on averagenUnderpricing causes the issuer to“leave money on the table”15.12Figure 15.215.13Figure 15.315.14Work the Web ExamplenHow have recent IPOs done?nClick on the web surfer to go to the Bloomberg site and follow the“IPO Center”linknHow many companies have gone public in the last week?nHow have companies that went public three months ago done?What about six months ago?15.15New Equity Issues and PricenStock prices tend to decline when new equity is issuednPossible explanations for this phenomenonnSignaling and managerial informationnSignaling and debt usagenIssue costsnSince the drop in price can be significant and much of the drop may be attributable to negative signals,it is important for management to understand the signals that are being sent and try to reduce the effect when possible15.16Issuance CostsnSpreadnOther direct expenses legal fees,filing fees,etc.nIndirect expenses opportunity costs,i.e.,management time spent working on issuenAbnormal returns price drop on existing stocknUnderpricing below market issue price on IPOsnGreen Shoe option cost of additional shares that the syndicate can purchase after the issue has gone