Initial Public Offering James Excell Waldo Bezuidenhout Steph Hudema Ryan Ehmann

Initial Public OfferingInitial Public Offering

James ExcellJames ExcellWaldo BezuidenhoutWaldo Bezuidenhout

Steph HudemaSteph HudemaRyan EhmannRyan Ehmann

AgendaAgenda

What is an IPO?What is an IPO?Advantages and Disadvantages Advantages and Disadvantages

IPO’s from the:IPO’s from the:Firms PerspectiveFirms Perspective Investment Dealers PerspectiveInvestment Dealers Perspective Individual Investors PerspeciveIndividual Investors Perspecive

What is an IPO and who is What is an IPO and who is involved?involved?

IPO stands for initial public offering and IPO stands for initial public offering and occurs when a company first sells its occurs when a company first sells its shares to the public. shares to the public.

Firm:Firm:Going from private to publicGoing from private to public

Investment Banker:Investment Banker: Intermediary between firm and investorsIntermediary between firm and investors

Investors:Investors: Institutional and private investorsInstitutional and private investors

Advantages Vs. DisadvantagesAdvantages Vs. Disadvantages

Advantages:Advantages: Going public raises capitalGoing public raises capital Better rates when issued debtBetter rates when issued debt Can issue more stock.Can issue more stock.

Extra incentive for mergers/acquisitions Extra incentive for mergers/acquisitions Can attract talentCan attract talent

Employee stock ownership plansEmployee stock ownership plans

Disadvantages:Disadvantages: Lack of privacy Lack of privacy Can lose control over companyCan lose control over company

Firms PerspectiveFirms Perspective

Steps for an IPOSteps for an IPOUnderwriterUnderwriterProspectusProspectusFiling a ProspectusFiling a ProspectusListing RequirementsListing Requirements

Firms PerspectiveFirms PerspectiveUnderwriterUnderwriter

Hire an investment bankerHire an investment bankerAct as middlemanAct as middleman

Help negotiate the dealHelp negotiate the dealAmount of money to raiseAmount of money to raiseTypes of stockTypes of stock

Deal structured in a variety of waysDeal structured in a variety of waysFirm commitmentFirm commitmentBest effortsBest efforts

Firms PerspectiveFirms PerspectiveProspectusProspectus

Detailed documentDetailed documentProvides investment informationProvides investment informationExplains all aspects of a company’s Explains all aspects of a company’s

businessbusinessFinancial resultsFinancial resultsGrowth strategyGrowth strategyRisk factorsRisk factors

Firms PerspectiveFirms PerspectiveFive Steps of Filing a ProspectusFive Steps of Filing a Prospectus

1.1. File preliminary prospectus with File preliminary prospectus with securities commissionsecurities commission

2.2. Regulatory authorities review prospectusRegulatory authorities review prospectus

3.3. File an amended prospectusFile an amended prospectus

4.4. Securities commission issues a final Securities commission issues a final receiptreceipt

5.5. Approval allows sales of securitiesApproval allows sales of securities

Examples of Listing RequirementsExamples of Listing Requirements

Pretax incomePretax incomeNet tangible assetsNet tangible assetsNumber of shareholdersNumber of shareholdersShare priceShare priceMinimum number of shares outstandingMinimum number of shares outstanding

Investment DealerInvestment Dealer

Investment banker in the USInvestment banker in the US Intermediary between issuers and Intermediary between issuers and

investorsinvestorsOffer important adviceOffer important advice

Type of securityType of securityFeatures to be offered with securityFeatures to be offered with securityPrice Price Timing of saleTiming of sale

Investment DealersInvestment Dealers

Barclays Global Investors Services Barclays Global Investors Services Canada Limited Canada Limited

Berkshire Securities Inc.Berkshire Securities Inc.Acumen Capital Finance Partners Limited Acumen Capital Finance Partners Limited Emerging Equities Inc.Emerging Equities Inc.Evergreen Capital Partners Inc. Evergreen Capital Partners Inc. J.F. Mackie & Company Ltd. J.F. Mackie & Company Ltd.


Step one: Negotiate the dealStep one: Negotiate the dealMoney to be raisedMoney to be raisedType of securityType of securityDealer commitmentDealer commitment

UnderwriterUnderwriterBest effortsBest efforts


UnderwritingUnderwritingPurchase the security from the firmPurchase the security from the firmDealer assumes the riskDealer assumes the risk Issuer gets its moneyIssuer gets its moneyDealer profits from spreadDealer profits from spread


Underwriting syndicateUnderwriting syndicateGroup of investment dealersGroup of investment dealersLead underwriterLead underwriter

Oversees the syndicateOversees the syndicate

Diversify their riskDiversify their riskEnhanced marketabilityEnhanced marketability


Best effortsBest effortsAssume the role of agents in primary marketAssume the role of agents in primary marketDo not buy the securityDo not buy the securityLess riskLess riskGet commissionGet commissionSmaller, speculative companiesSmaller, speculative companies


Step two: Registration statementStep two: Registration statementFiled with the SECFiled with the SEC Information about offeringInformation about offering Information about companyInformation about company

Financial statementsFinancial statementsManagement backgroundManagement backgroundLegal problemsLegal problemsWhere money is to be usedWhere money is to be usedInsider holdingsInsider holdings


Step three: Cooling off periodStep three: Cooling off periodSEC investigate registration statementSEC investigate registration statementSet the effective dateSet the effective dateUnderwriter puts together the initial Underwriter puts together the initial

prospectusprospectusAKA: The Red HerringAKA: The Red HerringNo offer price or effective dateNo offer price or effective date

Greensheet for in-house use onlyGreensheet for in-house use only


Step four: Go on the roadStep four: Go on the roadDog and pony showDog and pony showHype the issue to institutional investorsHype the issue to institutional investors


Step five: ProspectusStep five: Prospectus ““Full , true, and plain disclosure of all material Full , true, and plain disclosure of all material

facts relating to the securities being offered”facts relating to the securities being offered”Filed with securities commissionsFiled with securities commissions

Approval usually takes 3 weeksApproval usually takes 3 weeks Issue is “blue skied”Issue is “blue skied”Sell the securitySell the securityProspectus must be mailed to all purchasers Prospectus must be mailed to all purchasers

of the security no later than midnight on the of the security no later than midnight on the second business day after the tradesecond business day after the trade

Individual Investor Individual Investor

Not the target marketNot the target marketMust have an account with investment Must have an account with investment

bankbankNo history on many companiesNo history on many companiesLock-up periodLock-up periodFlippingFlippingAvoid HypeAvoid Hype

Sit back and count yo blingSit back and count yo bling!!

Documents

Initial Public Offering James Excell Waldo Bezuidenhout Steph Hudema Ryan Ehmann