Issuing of securities and role of investment bankers in this process
•
Step I- Capital Raising Decisions
–
Amount to be raised
–
Type of securities used
–
Competitive bid versus negotiated deal
–
Selection of an investment banker
•
Step II- Capital Raising Decisions
–
Reevaluating the initial decisions
–
Best efforts or underwritten issues
–
Issuance costs
–
Setting the offering price
•
Step III- Selling Procedures
•
Step IV- Shelf Registrations
•
Step V- Maintenance of the Secondary Market
STEP 1
·
BOD decides how much fund to be raised. (private
placement or public placement)
•
Type of securities used
–
Bond/preferred stock/common stock
–
Offered to existing stockholders or sold to
general public
•
A company can offer a block of its securities
for sale to the highest bidder is competitive dealing. (high cost, high creditworthiness )
•
Negotiation a deal with an investment banker.
•
Company Act 2006, company must take services of
issue manager licensed by SEBON for the public offering of securities.
•
One can select the any one or two investment
bankers.
Step II
·
decisions are taken jointly by the firm and its
selected investment bankers.
•
For eg. Initially the company might have decided
to raise Rs 50 million by selling common stock.
–
Investment bankers might convince management
that it would be better off, in view or current market conditions, to limit the
stock issue to Rs 30 million and raise Rs 20 million from debt.
•
Best effort basis
–
Does not take guarantee that the securities will
be sold and the company will be able to raise required fund.
•
Underwrite the issue.
Investment bankers assures the
company, the entire issue will be sold, so IB bears significant risks in such
an offering
Step 3
•
Vetting Committee - Members representing SEBON,
NRB, NEPSE, Insurance Board and Company Registration Office.
•
Issuer will be asked to submit clarification
where it is not satisfy and incorporate in the prospectus accordingly.
•
SEBON can put certain conditions in approval.
•
Issue should open within 2 months of approval of
prospectus.
•
Application –accepted- 5 days to 15 days.
0 Comments