FINS1612 Tutorial 4 Questions:

5.
- Has to meet the ASX listing requirements
- Usually appoint an underwriter (usually an investment bank that specializes in
IPOs) who will make sure that the company has the necessary and right financials.
Underwriter will also ensure that the company raises the full amount of the issue
and assist with the structure, price and marketing of securities.
- Company then has to lodge a prospectus with ASIC that states terms and
conditions of security issue to public.
- If all requirements are met, company will float to the stock market.

11.
- Pro rata rights issue:
- Increase in companys issued capital to all shareholders that is typically issued at a
discount to market price.
Advantages:
- Gives existing shareholders an opportunity to maintain their pro rata share in the
earning and surplus of the company
- Financial management is relieved of having to sell the shares on the open market
- However can take time as company must prepare a prospectus (6 weeks)
Private Placement:
- Additional new ordinary shares that are issued to selected investors.
- No need to register a prospectus but a memorandum of information has to be
prepared
- Dilutes holding of non-participating shareholders.

13. Preferences shares are stocks with dividends that are paid before common stock
dividends are paid. In the event of bankruptcy, preferred shareholders have higher
priorities than common stock in being paid.
a) Structure of a preference share
allows the company to expand funds even if its reached its optimal debt/equity
ratio as preference shares are essentially fixed interest borrowings which count as
equity. Associated cash flows are the dividends that the company will payout at a
fixed date, the cash payment to the holder if the preference share is redeemable,
and in the case of bankruptcy, the preference share holder would receive cash in
priority ahead of ordinary shares.

b) Cumulative / Non-Cumulative, Redeemable / Non-redeemable, Convertible / Nonconvertible, Participating / Non-participating

All options will still meet funding needs of the bank.
Convertible Notes:
- fixed interest debt security with option to convert into ordinary shares
- issued at a price close to the market price of the share at the time, rate of interest
is usually lower than normal debt instruments due to conversion option.
- different from straight debt as rate of interest is usually lower and term to maturity
is considerable longer
Company Issued Options:
- Security that option to buy ordinary shares of the company at a predetermined
future date and pre-determined price.
- usually offered with rights issue or placement or sold at a price
- different from straight equity as the funding isnt guaranteed
Company Issue Equityt Warrants:
- Option to convert warrant into ordinary shares at a specified price over a given
period. (Form of an option).
- Warrant generally attaches to a corporate bond debt issue of the company