Int. Acc. FA LECT 4: CH 15 part 2: Equity (Share issues twitter…
Int. Acc. FA LECT 4: CH 15 part 2: Equity
Share issues twitter
Companies are using Twitter more and more to disseminate financial information (Blankespoor, Miller and White, 2013)
Use of social media even led the financial markets regulator (SEC) to issue guidelines on the use of social media for company disclosures:
Social networking service
Share issues twitter: The IPO process – who is involved?
Underwriters: investment banks guiding the IPO process – contact institutional investors (consortium of banks led by Goldman Sachs)
Firm seeking to raise capital (Twitter)
Designated market makers: bank responsible for collecting bids
and asks from other investors on the day of the IPO (Barclays)
Security Exchange Commission (SEC)
Market regulator: IPO firm has to register with the regulator and provide all necessary disclosures (Securities and Exchange Commission)
Other investors get to buy shares on the day of IPO.
Share issues twitter
2) Underwriters take over will organize and coordinate the share issuance. They are responsible for the distribution of shares among institutional investors (lead underwriter: Goldman Sachs).
3) Underwritercontactsinstitutionalinvestorsto investigate demand for Twitter shares (road shows etc).
2) Twitter needs to register its IPO with the SEC by filing a form S-1 (incl. prospectus). Gets permission for the IPO.
6) Stock market opens :price discovery begins.The designated market maker (Barclays) collects all bids and asks – sets price for trasnactions on the NYSE
1) Twitter wants to raise money by issuing shares.
7) Price discovery leads to first tradingprice:$45.10. Note this is higher than the IPO price (difference in proceeds does not go to Twitter.
8) Underwritersandotherparties(lawyersetc.)geta commission for guiding the IPO (3.25% of the IPO proceeds of $1.82). On balance sheet (later): $1.76bn. Difference is commission earned by underwriters
Listed on NYSE instead of
NASDAQ (tech stocks typically
list on NASDAQ)
Longest price discovery process
for a NYSE stock: first trading
day $45.10 (IPO price = $26.00
this amount is used to determine
No Class B shares to retain