equity finance
There are two main options for the mobilization of resources for capital markets: equity and debt financing. In the first case the company enters the market with its shares, i.e., receives funds from the further sale of the shares or by increasing the number of owners, or for the account of additional contributions already existing owners. In the second case, the company produces and sells on the market of term debt securities - bonds , which give their holders the right to long-term receipt of current income and return provided by the Fund in accordance with the conditions defined in organization of the bond loan.
So, in the first case we talk about the so-called IPO, under which in the classic sense means the initial public offering, when the first company produces its shares on the market and acquire a wide range of investors.
the concept of IPO placing on the market of a significant block of shares through the mechanisms of public offering, which sometimes also referred to this concept:
private placement among a narrow circle of pre-selected investors to listing on the stock exchange (placing, private offering);
placement of the company whose shares are already traded on the exchange, of the additional the issue of shares on the open market - the so-called prior to placement, or secondary public offering (follow-on);
a public sale of a large share of existing shareholders - secondary public offering (SPO);
direct public offerings of the Issuer and the forces of the Issuer directly primary investors, bypassing the organized market - direct public offering (DPO).
Passing the procedure of the IPO, the company become open joint-stock companies, and their shares start trading on stock exchanges. The procedure of IPO (issue of securities) includes the following stages:
adoption of a decision on placement of securities;
approval of the decision on issue (additional issue) of the emissive securities;
state registration of the issue (additional issue) of the emissive securities;
placement of emissive securities;
state registration of the report on the results of the the issue (additional issue) of emissive securities or presentation of the notice to the registration body about the results of the issue (additional issue) of emissive securities.
Contrary to popular opinion the raising of funds in the course of the public placement of shares for the company is not always the most effective and the cheapest way of raising funds. A public placement of shares is justified for:
increase of capitalization of the company (the return of the controlling shareholders invested in the development of business assets; preparation of deals on the market for corporate control; creation of the basis for attraction of loan capital);
investment attraction (coverage of short-term deficiency of money resources, necessary for formation of circulating assets; coverage of medium-and long-term deficit of monetary resources necessary for financing of capital investments, including projects of subsidiaries);
business restructuring (the change of ownership structure; the absorption of the companies-competitors; closure of non-viable companies; financial restructuring);
other purposes ((marketing of the enterprise; creation of a stock exchange the company's history; option programs for the management, financial engineering, etc.).
The public placement of shares is a complex of organizational, legal and financial procedures, in which in addition to the companies and potential investors involved intermediaries. The main intermediary between the company and the investors is the underwriter, the main objective of which is to conduct a successful IPO, the results of which will satisfy both the Issuer and investors. The main tasks of the underwriter: choice of the scheme of placement of the shares; the Issuer's analysis; preparation and implementation of all legal procedures; information tracking; the attraction of investors; organization of the work of other intermediaries, etc.
