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Sld15 Invest Underwriting
Sld15 Invest Underwriting
FIFTEEN
Investment
Underwriting: Public
and Private Placement
McGraw-Hill Ryerson
FIF T H
th
CANADIAN
EDI TI ON
Figure 15-1
Distribution process for an investment deal
MaxwellCorporation
Corporation
Maxwell
Managinginvestment
investmentdealer
dealer
Managing
Underwritingor
orbanking
bankingsyndicate
syndicate
Underwriting
Selecteddealers
dealersor
orsellers
sellersgroup
group
Selected
Brokers
Brokers
Block
Hirt
Short
Public
Public
McGraw-Hill Ryerson
FIF T H
th
CANADIAN
EDI TI ON
Figure 15-2
Allocation of underwriting spread
Price received
Block
Hirt
Short
Managinginvestment
investmentdealer
dealer
Managing
$19.60
Othersyndicate
syndicatemembers
members
Other
$20.00
Selecteddealer
dealergroup
group
Selected
$20.20
Broker
Broker
$20.50
Public
Public
McGraw-Hill Ryerson
FIF T H
th
CANADIAN
EDI TI ON
Figure 15-3
New corporate issues underwritten in 1998 in Canada
20
18
16
$ billions
14
12
10
8
6
4
2
0
Block
Hirt
Short
Convertible
pre ferreds
Othe r
pre ferreds
Medium term
notes
Convertible
de bt
Othe r debt
McGraw-Hill Ryerson
PPT 15-4
EDI TI ON
Figure 15-4
New equity financing, Toronto Stock Exchange, 1988-1998
$ billions
FIF T H
Foundations of Financial
Management
th
CANADIAN
24
22
20
18
16
14
12
10
8
6
4
2
0
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Block
Hirt
Short
Public offerings
Private offerings
Rights offerings
McGraw-Hill Ryerson
FIF T H
PPT 15-5
EDI TI ON
Table 15-3
Big international deals - The Americas ($ millions)
Country
Block
Hirt
Short
Foundations of Financial
Management
th
CANADIAN
Company
Business
Year
Sale
Price
The Americas
Argentina
YPF
1993
$2,500
Bolivia
Brazil
Power plant
Steelmaker
1995
1993
$58
$1,056
Canada
Chile
Petro-Canada
CTC
1991
1988
$1,980
$115
Columbia
Banco de Columbia
Banking
1994
$490
Cuba
Jamaica
Telecommunications
Telecommunications
1994
1987
$706
$61
Mexico
Etecsa
Telecommunications of
Jamaica
Telmex
Telecommunications
1990
$7,000
Panama
Cementos Bayano
Cement
1994
$60
Peru
ENTEL-CPT
Telecommunications
1994
$2,000
Venezuela
Cia. Anonima
NacionalTelefonos de
VeneZuela
Telecommunications
1991
$1,900
McGraw-Hill Ryerson
FIF T H
th
CANADIAN
Foundations of Financial
Management
EDI TI ON
Chapter 15 - Outline
LT 15-1
FIF T H
th
CANADIAN
Foundations of Financial
Management
EDI TI ON
LT 15-2
FIF T H
th
CANADIAN
Foundations of Financial
Management
EDI TI ON
LT 15-3
Underwriter:
buying the security and reselling it to the public (large companies)
selling security on commission basis (unknown companies)
Market Maker:
ensuring an available market by buying and selling the security
Advisor:
on securities issues, mergers and acquisitions, leveraged buyouts,
corporate restructuring
Agent:
for private placements, mergers, acquisitions
Block
Hirt
Short
McGraw-Hill Ryerson
FIF T H
th
CANADIAN
Foundations of Financial
Management
EDI TI ON
Underwriting Spread
LT 15-4
FIF T H
th
CANADIAN
Foundations of Financial
Management
EDI TI ON
LT 15-5
FIF T H
th
CANADIAN
Foundations of Financial
Management
EDI TI ON
LT 15-6
Block
Hirt
Short
FIF T H
th
CANADIAN
Foundations of Financial
Management
EDI TI ON
LT 15-7