Free Essay

Initial Offerring

In: Business and Management

Submitted By tothecribb16
Words 1107
Pages 5
Initial Public Offering
All firms must have a source of funds to acquire assets and retire outstanding debt. One possible source for these funds includes savers who are not currently using all of their income to buy goods and services. The transfer of these funds may occur indirectly through a financial intermediary or directly through the purchase of securities issued by firms. The investment bankers act as a middleman between the firm and investors who underwrites the securities and guarantee the issuing firm a specified amount of money. The SEC also enforces the federal securities laws that govern the trading of corporate stocks and bonds in the secondary markets. The intent of SIPC is to increase public confidence in the securities industry by reducing the risk of loss from a failure by a brokerage firm.
Investment Banker and Underwriter
The initial public offering (IPO), involves many pieces coming together to offer an organization’s shares to public. When high-level issues of financial organization come into play, investment bankers are hired to provide advice (The Princeton Review, 2014). Once investors make the IPO the investment banker acts as a middle man. Their role is to sell the stock to the public while bringing the investors and the firm offering the shares together. “The firm in need of funds approaches the investment bankers to discuss an underwriting (Mayo, 2012, p. 37." Based on the investment banker’s guarantee to sell, an underwriter purchases the securities. This agreement to purchase these securities obligates the underwriter to bear the risks associated with making the promised sales (Mayo, 2012). If the investment banker does not sell the securities, the underwriter is held financially responsible.

Originating House and Syndicate
With each investment banker comes a brokerage firm. “An underwriting starts with a particular brokerage firm, which manages the underwriting, that firm is called the originating house (Mayo, 2012, p. 38." When the underwriting involves multiple brokerage firms, they come together to form a syndicate. A syndicate relieves the originating house from selling all of the securities. Instead, the syndicate comes together to portion out a specific number of securities to each firm. Syndicates come with the additional advantage of reaching more buyers that increase the likelihood that all of the issued securities sell (Mayo, 2012).
Pricing a New Issue
Most sales of new securities are underwriting, the pricing of securities is crucial. If the initial offer price is too high; the syndicate will be unable to sell the securities leaving the investment bankers to have only two choices. (1)Maintain the offer price and to hold the securities in inventory until they sale. (2)Allow the market find a lower price level that will induce investors to purchase the securities. The underwriters purchase the securities and hold them in inventory, and they either must tie up their funds, which could be earning a return elsewhere or must borrow funds to pay for the securities. The underwriters may choose to let the price of the securities fall, and the inventory of unsold securities can then sell at a lower price. They also cause the customers who bought the securities at the initial offer price to lose. The underwriters certainly do not want to inflict losses on the customer, so the investment bankers try not to overprice a new issue of securities (Mayo, 2012 pg. 39)
Risks in the Public Offering Crossing state borders is not unusual for securities, so the primary regulation is at the federal level. These laws have been developed to protect the investor but in no way guarantee the investor will make money. They were first developed in the 1930’s as a result of the chaos in the market crash of 1929. “The 1933 act covers new issues of securities, and the 1934 act is devoted to trading in existing securities,” (Mayo, 2012 pg. 43). Since the acts would require administrative oversight, the Securities and Exchange Commission (SEC) was established.
Full-disclosure laws indicate that a firm that is publicly traded must keep the public informed on facts regarding the firm. In addition to filing reports during the year regarding material changes to the firm, the firm must file an annual report (the 10-K report) with the SEC. This information in the annual report to investors and is supplied free of charge. If the firm does not disclose such information that may affect their trading capacity, the SEC may suspend trading of their stock.
Foreign exchange risks the company can face and ways to mitigate them.
The main risks that may occur with foreign exchange risks the company can face include currency's exchange rate and political risk. Foreign exchange risk occurs when a domestic currency appreciates against a foreign currency. Due to the somewhat volatile nature of the exchange rate, it can be quite difficult to protect against this kind of risk, which can harm sales and revenues. A business may attempt to hedge some of its foreign exchange risk by buying futures, forwards or options on the currency market.
Political risk transpires when a country's government unexpectedly changes its policies, which now negatively affect the foreign company. Some governments will request additional funds or tariffs in exchange for the right to export items into their country. Acts of war, terrorism, and military coups and a new president are all extreme examples of political risk. The best way to avoid the barriers is to do research, and acquire political risk insurance in order to protect equity, investments, and loans from specific government actions.
Investment banker serves as a middleman between prospective investors and companies that intend to raise capital through the issuance of new stock. The underwriters are responsible for pricing, selling and organizing. Originating house and Syndicate are investment bankers joined together to manage the underwriting and sale of a new issue of stock to the general public. A firm may not sell public offering shares to an individual investor unless it has determined the investment is suitable for that particular investor. When an organization decides to engage in international financing activities, they risk the value of an investment fluctuates due to changes in a currency's exchange rate.

References
Foreign Currency Transaction Risk, retrieved November 19, 2014 from http://www.sjsu.edu/faculty/watkins/tran.htm
«Managing Foreign Exchange Risk» retrieved November 19, 2014 from http://www.edc.ca/EN/Knowledge-Centre/Economic-Analysis-and-Research/Documents/managing-foreign-exchange-risk-guide.pdf
Mayo, H. B. (2012). Basic finance: An introduction to financial institutions, investments, and management (10th ed.). Mason, OH: South-Western.
The Princeton Review. (2014). Career: Investment banker. Retrieved from http://www.princetonreview.com/careers.aspx?cid=84…...

Similar Documents

Premium Essay

Initial Counseling

...Counseling for Soldiers RANK: NAME: DATE: This is your initial counseling statement. This counseling statement is to inform you of my expectations of you as a member of Second Platoon. If you have any questions or comments, please feel free to address those to me or members of your chain of command, and I will work them out as needed. Your areas of concern are: 1. Timeliness: Make sure you are at least 10 minutes prior to all announced formations or events. 2. Accountability: Be where you need to be, when you need to be there. In all events, you need to keep your first line leaders (FLL) informed, in their absence one of the other NCOs within your direct chain of command should be aware of your whereabouts at all times. 3. Uniform: Your uniform needs to be presentable at all times. At no time should your uniform fall below the standards set forth in AR 670-1. Motor Pool duty and Field Exercises are not an excuse to wear a substandard uniform. Also, you need to make sure you are in the correct uniform for the mission. If you are unsure of the correct uniform, contact your first line supervisor and they will provide you with that information. 4. Duties: If you have duty, you need to ensure that you are in the proper place, at the proper time, and in the correct uniform for that duty. You will be informed of any duties in a timely manner. Be aware that things......

Words: 633 - Pages: 3

Premium Essay

Initial Public Offerings

...Since the company is looking to transform from Private to Public they will need to go through the process of an Initial Public offering. An initial public offering is a company’s first time offer of common stock to the general public. As a privately held company expands it may need more funds than it can obtain through borrowing. A common first step in the case of IPO’s is to obtain private equity from venture capitalist. These investors seek to invest in firms that offer high potential growth over time. These venture capitalist typically look for investments Ranging from 2-5 years. Therefore firms will not only use IPOs to obtain new funding but also a way to offer venture capitalist to cash in on their investments. In most cases firms entering IPOs are not known well among investors because of this they must provide detailed information about their operations and financial conditions in a professional document known as a prospectus. This prospectus is typically written by an underwriter hired by the firm. Typically this underwriter is an investment banking firm who absorbs the risk of the initial cost of the IPO. The prospectus must also contain risks involved with the company. It is intended to provide potential investors with the information they need to decide while debating to invest in a company. Within 30 days of the developed prospectus the Securities Exchange Commission will assess the prospectus to determine if it has sufficient information relevant to investors...

Words: 512 - Pages: 3

Free Essay

Initial Tone of Camus' the Stranger

...THE STRANGER PART I CHAPTER 1: REACTION TO TONE AND OPENNING BY CAMUS The opening to Camus’ The Stranger, has, ever since the novel’s publication, been a recurring aspect and reference in existential literature. The novel opens to the death of the protagonist, Meursault’s, mother. Her death plays a major role which recurs through the plot, but in the essence of the opening to The Stranger, it already introduces readers to the indifference of the protagonist and the initial tone at which the story is told. From the first paragraph, Camus lets the reader already establish an initial tone; through which he establishes thru many ways. Primarily in the texts structural level, Camus established the tone with the use of short, declarative sentences with no emotion. The narration is done in a matter of fact way creating the detached tone which resonates throughout the whole chapter. The detached tone allows no medium for which emotion is to pass. No matter the event the text maintains this structure of declarative, short clauses bearing no emotion- thus adhering to the tone of detachment. Secondly, Camus also uses digression as a method of establishing the detached tone. Digression serves as a method for Meursault to go to his own world: one he could call his own, with his own norms and beliefs. The motif which recurs as a medium for Meursault’s digression is the weather. This is witnessed initially in the bus trip as he dozes off from glaring at the sky (Pg4). This occurs just......

Words: 674 - Pages: 3

Premium Essay

Mis Initial Thesis

...Initial Paper MIS 770 My experience has not been too significant. Although I was an electronics technician in the Navy, that dealt with more of physical circuit boards and not the IT division. The Navy was first experience into anything secure for IT. On our ship we had an intranet that allowed for internet access, but provided for an email system that was only sent through our system and not the World Wide Web. When we needed to send an email out to the civilian world, the email system would take a little longer for people to receive our messages. A lot of security measures had to be taken place on our ship from the IT division so that ship safety was never in danger. After the Navy, I have never had any direct IT work detailing programs for businesses or security systems. I have used several programs that are IT related. Blackboard has been an amazing experience that I've used. Being allowed to submit assignments and chat with individuals in my class has made my life more convenient. I loved the aspect of taking exams and quizzes online as well. It allows for easy grading for the teacher and easy access for the student. Email has been an IT service that I have used for several years. Even in my high school days we had email. Email has been so revolutionary that physical mail literally almost needs to be non-existence. I receive my bills in an email; I receive my grades and several things in email from school. It is extremely efficient. Although......

Words: 1333 - Pages: 6

Free Essay

Gatsby Initial Impressions

...Initial impressions of Gatsby - Chapters 1-4 We see and hear relatively little of Gatsby in the opening chapter of the novel; he is presented as an almost ephemeral, ghost like figure. However we are drawn to his character by the way he is described: ‘There was something gorgeous about him, some heightened sensitivity to the promises of life’. Consequently, Every time he is mentioned there is always something to interrupt which adds to the mysteriousness of his character. At the end of chapter 1 we catch a glimpse of him where he is bonded with strong romantic imagery, he comes out to see ‘the silver pepper of the stars’ and is spotted when ‘the silhouette of a moving cat wavered across the moonlight’. Fitzgerald combines the purity and romance of Gatsby’s dream with these symbols. On the contrary when he gives a ‘sudden imitation that he was content to be alone’ by stretching out his arms towards the ‘dark water in a curious way’ the purity of his character seems to disappear as the ‘single green light, minute and far away’ suggests the ill omen of his character. In Chapter 3 Fitzgerald uses the part scene to introduce Gatsby to the reader, here Gatsby emerges as a mysterious character who is the subject of gossip, He is well known but ironically nobody seems to have any verifiable information about him. Nick then describes him and says ‘he had one of those rare smiles with a quality of eternal reassurance in it’ the way Gatsby us portrayed is one of extreme modesty, he......

Words: 399 - Pages: 2

Premium Essay

Initial Interview

...Initial Interview (Mental Status Exam) Lonna Shelton-Soward Liberty University Project 1: Initial Interview Identifying Information Sienna Jackson-Showers a 20 year old, single female Liberty University student lives resides at 3456 Crystal Ave., Park, MD 20947. Her number is 202-789-5678 or work 301-496-2345. She is a Lifeguard and Child Care Provider at the YMCA. For an emergency contact Ty Mason number 240-789-4857 address 856 Pen Circle, Fredrick, MD 209876. Purpose of Counseling/Presenting Problem Would this examinee make a good Resident Assistant (RA) at Liberty University? Physical Appearance Presenting Appearance Ms. Sienna Jackson-Showers is a 20 years old, African American female. She is a brave and courageous field hockey forward, standing 4 feet 8 inches. She weighs 105 pounds and has an athletic petite muscular built. Sienna was dressed for success in black slacks, a red button down, black blazer, two inch peep-toe heels, and red glasses. She did not have any physical deformities present. Basic Grooming and Hygiene Sienna presents a neat, clean, and natural appearance. Her medium length black hair was pulled back into a well-manicured ponytail off her face. She wore appropriate natural toned make-up, clear nail polish and presented herself as a confident well groomed individual. Approach and Coordination As Sienna entered the room she walked gracefully and had a contagious smile on her face. She reached out her hand, gave me a firm......

Words: 1502 - Pages: 7

Premium Essay

Kinetics by the Initial Rate Method

...Kinetics by the Initial Rates Method Introduction Rate laws are mathematical expressions that describe the relationship between reactant concentrations and the rates of reaction, taking the form, Rate = k[reactant 1]m[reactant 2] n[reactant 3]p… [M/s] (1) The proportionality constant k is the rate constant; any given reaction has a specific value of k for a given set of conditions, such as temperature, pressure, and solvent; the rate constant, in contrast to the rate of reaction, does not depend on the concentration of the reactants. Exponents m, n, p, …, are the reaction orders, and indicate the degree to which the reaction rate depends on the concentration of the associated reactant. “There is no simple correlation between the stoichiometry of the reaction and the rate law”; the reaction orders, and thus the rate constant, must be determined experimentally, as in this experiment between acetone (CH3COCH3), the hydronium ion (H3O+), and iodine (I2), called the iodination of acetone. The reaction in this experiment is shown in Figure 1 and Eq.2.2 Figure 1. Reaction of acetone, iodine, and hydronium ion. CH3COCH3 (aq) + I2 (aq) CH3COCH2I (aq) + HI (aq) (2) Thus, the rate law in this experiment is shown in Eq. 3. Rate = k[CH3COCH3]m[H3O+] n[I2]p (3) The reaction rate expressions are shown in Eq. 4. Rate = -Δ[CH3COCH3]/Δt = -Δ[H3O+]/Δt = -Δ[I2]/Δt (4) Spectrophotometry can be used here to measure the reaction rate expressed as the......

Words: 3232 - Pages: 13

Premium Essay

Initial Public Offering

...Key Concepts * Initial Public Offering (IPO) - First offering of stock to the general public. * Underwriter - Firm that buys an issue of securities from a company and resells it to the public. * Spread - Difference between public offer price and price paid by underwriter. * Prospectus - Formal summary that provides information on an issue of securities. * Underpricing - Issuing securities at an offering price set below the true value of the security. Type of IPO offers * Seasoned Offering - Sale of securities by a firm that is already publicly traded. * General Cash Offer - Sale of securities open to all investors by an already public company. * Shelf Registration - A procedure that allows firms to file one registration statement for several issues of the same security. * Private Placement - Sale of securities to a limited number of investors without a public offering. Management’s first task was to select the underwriters. Underwriters act as financial midwives to a new issue. Usually they play a triple role: First they provide the company with procedural and financial advice, then they buy the issue, and finally they resell it to the public. 1.Company appoints managing underwriter (bookrunner) and comanager(s). Underwriting syndicate formed. 2. Arrangement with underwriters includes agreement on spread (typically 7% for medium-sized IPOs) and on greenshoe option (typically allowing the underwriters to increase the number of......

Words: 1862 - Pages: 8

Premium Essay

Initial Public Offerings

...research, and preparation that goes into an initial public offering. Setting a price for the IPO is a critical step with several factors to consider. Most new securities have their price set by an underwriter. One thing an underwriter must consider is the consequences of setting the issue price of the new offering. If the price is too high, the investment bank that initially purchases the securities will have trouble selling them. If the price is too low, the issuing company will not realize the income that it otherwise could. Either of these two scenarios can have a detrimental effect on the investment bank, issuing company, or both. Market research is necessary to understanding how the forces of supply and demand will affect the original value of a stock. (Raice, 2012). Risk and Securities Laws Investing in a newly offered stock has inherent risks associated with the investment. An IPO may have little or no demand in the market. Researching demand for the IPO and considering its performance at present and future market conditions will help reduce marketplace risk. Financial risk is fundamental to investing. By analyzing a company's financial statements and other financial information, an investor can determine the likelihood of the offering producing a profit for investors. The market has proven to be volatile and hard to predict accurately. Market conditions have a lot to do with the risk of investment. An IPO by definition is the initial offering of the stock. As......

Words: 468 - Pages: 2

Premium Essay

Role of Initial Assessment in Teaching

...The role of initial and diagnostic assessment in agreeing learning goals The way in which minimum core elements can be demonstrated in planning and delivering inclusive teaching and learning [give examples] The ways in which feedback [from learners] can be given to improve the planning of teaching and learning [give examples] 1.1 Analyse the role of initial and diagnostic assessment in agreeing individual learning goals. SEE THIS IN MY CTTLS FOLDER The role of the initial and diagnostic assessment is to select the right people for the course, plan an individual’s learning and is the first part of the teaching and learning cycle. It identifies a starting point, the needs of the learners and that they are on the right course. Certificates can be checked to make sure the learners are at the correct level for the course they are applying for. In the health and social care sector other considerations have to be made as the learners will ultimately be working in a caring profession, it is harder to make a character judgement on a learner’s suitability. This process can be subjective and requires the person who is doing the interview to be skilled in making accurate judgement about the type of person and characteristics that are required. Learning skills, knowledge and preferred learning styles need to be assessed before teaching a programme. Why they are on the course, prior knowledge and what the learner’s wish to achieve are important (Gravells and Simpson......

Words: 2049 - Pages: 9

Premium Essay

Initial Assessment

...Abstract This paper provides an interim assessment of my company by using certain tools as applicable. The analysis will seek to address the following: what tools are available to provide analysis, identify the tools and how they are used, the benefits of each tool, concluding with an organization change agenda demonstrated by a Balance Score Card of the company. The following tools will be used in the analysis: Organizational Culture – “This is defined as a pattern of basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problem of external adaptation and internal integration”. This assumes the initial stage of identifying Organizational Capital We will examine the Nirvana group using the “ice berg” principle to demonstrate how the culture is made up. The “7-s Frame work”---A system used to garner a better understanding of an organization. This tool will be used simultaneously to: To conduct a SWOT analysis and identify the seven key elements existing in the company and to what benefit they serve. “Balanced Score Card”--- This will address the organization change agenda by identifying and measuring three criteria, namely; Customer Perspective, Alignment, and teamwork. Resort Demographics The Nirvana hotel group is Jamaican owned and operated, it comprises four resorts totalling 920 rooms “Nirvana Resorts’ primary target market is defined as the active, romance-expectant couple. The typical clientele are......

Words: 1401 - Pages: 6

Free Essay

Initial Post

...M Weight: 255 lbs 12 oz Code Status: 02 Isolation: 00 Food Allergies: 00 Diet: 01 Hospital Floor: Age: 62 Y Height: 6' Alerts: 00 Drug Allergies: 00 Env. Allergies: 00 BMI: 34.7 Medical-Surgical Student: Marlen Flores Assignment: Assessment 1 Submitted: 02/16/2016 15:49 Clinical Assignment Grading Assignment Objectives No assignment objectives entered. Clinical Set-up Details First Day of Clinical: 02/10/2016 Primary Diagnosis: Chronic obstructive pulmonary disease (COPD) Provider Name: P, A Secondary Diagnosis: Student Details: Patient Details: First Initial: M Identifier 1: L Last Name: Flores Identifier 2: M Credentials: SNPC Gender: M Age: 62 Years Pre-Clinical Manager Patient Info Identifier: M, L Gender: M Age: 62 Y Nurse Initials: M Flores, SNPC Diagnosis (1) Primary Diagnosis: Chronic obstructive pulmonary disease (COPD) Patho-Physiology: A progressive disease that is associated with difficulty breathing due to severe injuries to the pulmonary alveoli. The cause of this disease is the continuous exposure to cigarette smoke either actively or passively, and contaminated environments which reduces the shortness of breath and chest tightness. COPD may appear as two distinct disorders: emphysema and chronic bronchitis. Emphysema is the broadening of the alveoli and the destruction of their walls. Chronic bronchitis is manifested as a......

Words: 4495 - Pages: 18

Premium Essay

Initial Public Offering- Visa

...Initial Public Offering Paper: VISA Introduction An initial public offering takes place when a company issues common stock or shares to the public for the first time. There are several reasons for companies to go public, for example, small and young companies that seek capital to expand and large privately owned companies that want to become publicly traded. After a company lists its securities on a public exchange, the money collected from investors for the sale of the shares goes directly to the company. Once a company is listed, it is able to issue additional common shares via a secondary offering. Usually, these kinds of public offerings are made by companies wishing to refinance, or raise capital for growth. This ability to quickly raise large amounts of capital from the market is a key reason many companies seek to go public. Visa Inc. is a global payments technology company headquartered in San Francisco, California. It facilitates electronic funds transfers throughout the world. Visa does not issue cards, extend credit or set rates and fees for consumers; instead, Visa provides financial institutions with Visa-branded payment products that they then use to offer credit, debit, prepaid and cash-access programs to their customers. Visa has operations across Asia-Pacific, North America, Central and South America, Caribbean, Central and Eastern Europe, Africa and Middle East. Visa’s industry is Financial Services which includes a broad range of organizations......

Words: 2262 - Pages: 10

Premium Essay

Initial Counseling

...Date of Counseling: 17 October 2011 Subject: Initial counseling For: SGT Pereyra, Francisco J. 6. You are overall responsible for the accountability of your soldiers. I believe that soldiers should work smart and hard during the normal duty day so that we can maximize time off and maintain normal work hours. However, mission will at times dictate weekends or late nights upon approval from the Battalion Commander. We can avoid self-inflicted problems by keeping track of appointments, breaks, and other situations that interfere with the mission. Remember soldiers take the initiative when the example is set. All appointments will be brought to my attention at least 2 days prior, emergencies are understood but they should be the exception rather than the rule. If you believe a soldier should receive time off, bring it to my attention. Keep me informed! Open communication is the key to success. 7. Maintenance of your equipment is essential to success of the mission. You will ensure that your vehicles are properly maintained and service (if any). Your soldiers will be licensed on all platoon equipment. You will strictly enforce SAFETY at all times by word of mouth and example. 8. As Noncommissioned Officers we have the authority to discipline our soldiers. Discipline takes many forms including: on the spot corrections, verbal counseling, formal counseling, corrective training and the commander/1SG can support us with other useful methods including......

Words: 625 - Pages: 3

Premium Essay

Initial Public Offerring

...INITIAL PUBLIC OFFERING: ELECTROMED, INC WRITTEN BY: Edward N Towah FI 516 Advance Managerial Finance Presented to: Miriam Benard, Instructor June 2, 2012 Introduction The purpose of this paper is to select a publicly-traded company that has had an Initial Public Offering (IPO) within the last 10 years and discuss its impact on the company. The discussion will focus on how successful was the company in raising capital through its IPO. Further, it will elaborate on what had happened since the IPO and the trend of the stock price. It will summarize the financial conditions of the company since its IPO up to the present. An Overview of Electromed, Inc. Electromed, Inc is a publicly-traded company, trading on the NYSE under the symbol “ELMD” to be referred to as the company or Electromed. Electromed was founded in 1992 and is headquartered in New Prague, Minnesota. The company manufactures, markets, and sells products that provide airway clearance therapy, including the SmartVest® Airway Clearance System and related products, to patients with compromised pulmonary function. It offers Electromed SmartVest airway clearance system with a pneumatic therapy garment and an electronic pulse generator, which generates high frequency chest wall oscillation to patients suffering from cystic fibrosis, chronic obstructive pulmonary disease, bronchiectasis, and repeated episodes of pneumonia.......

Words: 1571 - Pages: 7

CLEARBLUE Advanced Digital Ovulation Test With Dual Hormone Indicator 20 Tests | View More | Sibel Kekilli