FINANCIAL MARKETS New Stock Issue Process Documents Used Impact on Shareholders Primary Market market in which new issues of securities are sold to investors o Initial Public Offerings IPO s the first public sale of a company s stock o Seasoned Equity Issues sale of additional stock o Public Offering firm offers its securities for sale to public investors o Rights Offering shares to current stockholders on a pro rata basis o Private Placement firm sells securities without SEC approval to select groups of private investors insurance companies investment management funds and pension funds o IPOS Initial Public offerings o obtain the approval of its current shareholders o auditors and lawyers must certify that all financial disclosure o Under Writing Process o Prospectus describes the key aspects of the securities to be issued documents for the company are Accurate the issuer s management and the issuer s financial position Red Herring preliminary prospectus o After SEC approves the registration statement the investment community begins analyzing the company s prospectus Quiet Period time from when the company files its preliminary registrations statement until at least one month after IPO is complete the company and the company s lawyers auditors and underwriters must observe a quiet period which there are restrictions on what can be said about the company Purpose is to make sure all potential investors have access to the same information about the company o Road Show During the registration period and prior to the actual IPO date the investment bankers and company executives promote the company s stock offering through a road show IPO are not necessarily good long term investments o Most companies that go public are small fast growing companies that require additional capital to continue expanding Types of Exchanges Listings Broker Markets markets New York Stock Exchange o NYSE dominant broker market o NYSE NYSE Amex Regional Options Futures Foreign Exchange o Most securities exchanges are modeled after NYSE o Became a publicly traded company is 2006 o Used to lease 1336 seats o Seat comes from the fact that until the 1870 s members sat in chairs o commission brokers and independent brokers while trading NYSE Amex o All transactions on the floor occur through an auction process Goal is to fill all buy orders at the lowest price and fill all sell orders at the highest price o dual listing listing on more than one exchange o To be on the NYSE US firm must have at least 400 stockholders owning 100 or more shares and a minimum of 1 1 million shares of publicly held stock outstanding aggregate pretax earnings of at least 10 million over the previous three years of at least 2 million in the previous two years and positive for the first of the last three years and a minimum market value of public shares of 100 million Also must pay an original listing fee between 150 000 and 200 000 Firms that fail to meet specified requirements may be delisted from the exchange younger firms choose to list on the NYSE Amex o Organization and procedures similar to those of the NYSE o Because listing requirements are less stringent many smaller and o 500 listed stocks o Focused on more specialized market instruments o Today about 2 3 of its daily volume comes from exchange traded funds ETF s a security pioneered by the NYSE Amex o These funds are baskets of securities that are designed to track an index of the broad stock or bond market a stock industry sector or international stock but that trade like a single stock o Trading in stock options is another large segment of NYSE Amex s business requirements are considerably more lenient o Most modeled after the NYSE but their membership and listing o Trading costs are also lower o Majority of stocks listed on regional exchanges are also listed on the o The dual listing may enhance a security s trading activity o Intermarket Trading System links nine markets through an electronic NYSE and NYSE Amex communications network that allows brokers and dealers to make transactions at best prices price over a given period of time o Options allow their holders to sell or buy another security at a specified o Dominant Chicago Board Options Exchange o Usually an option to sell or buy a given security is listed on all five Regional Exchanges Options Exchanges options exchanges Futures Exchange o Futures are contracts that guarantee the delivery of a specified commodity or financial instrument at a specified future date at an agreed upon price Dealer Markets o Dominant is the Chicago Board of Trade o No centralized trading floors o Made up of a large number of market makers who are linked together o Nasdaq o OTC markets via a mass telecommunications network Bull Bear Markets Changing market conditions generally stem from changes in investor attitudes changes in economic activity and government actions aimed at stimulating or slowing down economic activity pessimism economic slowdown and government restraint optimism economic recovery and government stimulus Identify an Appreciated or Depreciated Currency specified date currency with respect to the U S dollar or any other currency Bear Markets markets normally associated with falling prices investor Bull Markets markets normally associated with rising prices investor Some securities are bullish in a bear market or bearish in a bull market Currency exchange rate the relationship between two currencies on a Appreciation Depreciation changes in the value of a particular foreign o EX on August 21 2009 the exchange rate was 0675 From April to August the appreciated relative to the dollar and the dollar depreciated relative to the euro euro was worth more in dollar terms to the euro each euro would have been worth less in dollar terms o On August 21 it took fewer euros to buy 1 0675 vs 7418 so each o Had the euro instead depreciated and the dollar appreciated relative Major Focus Impact of Sarbanes Oxley Act Focuses on eliminating corporate fraud related to accounting and other information releases Passed to protect investors against corporate fraud particularly accounting fraud It created an oversight board to monitor the accounting industry tightened audit regulations and controls toughened penalties against executives who commit corporate fraud strengthened accounting disclosures requirements and ethical guidelines for financial officers established corporate board structure and membership guidelines established guidelines
View Full Document
Unlocking...