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Unit 7: Issuing securities - Coggle Diagram
Unit 7: Issuing securities
Primary Market Basics
Purpose of the primary market
Corps sell their stocks ans bonds to the public to raise money
Long term need to pay for Expansions, M&A, reduce debt
Governments sell bonds
To pay for major projects, ongoing expenses, replace higher interest debt with lower interest debt
Securities Act of 193
3
set most rules for the primary market
An issue must be registered with the SEC before sale
prospectus :
all investors in a corp issue
Official statement
: Investors in municipal issue
Participants in the primary market
Issuers
corporations, government
Underwriters
works with issuer to bring securities to the market and sell to the investing public
Investors
3 groups: Institutional, Retail, Accredited
Municipal advisors
Type of BD advising municipalities on issuing municipal bonds
Types of public securities offerings
IPO (initial public offering)
APO (additional public offering)
when an issuer sells more shares
Underwriting new issues
process of bringing a new security to the market
2 types of underwriting agreements
1) Best Effort agreement
acts as a go between the investors and the issuers
2 types of Best Effort Underwriting
AON underwriting (All or Non)
Mini-max offering
2) Firm Commitment Agreemnt
Underwriter purchases the securities from the issuer and resells to the investors
POP : they sell the shares at a higher price (Public Offering Price)
Spread: make money on the difference between the discount price and the POP
difference is the level of commitment form the underwriter
Syndicate
More common in Firm Commitment Agreement
Steps for a public offering